Getting a mortgage is a major milestone for many, but it can come with its own trials and tribulations, especially if you suffer from bad credit due to an IVA.
In this guide, we’ll explain how an IVA can affect your ability to get a mortgage and what you can do about it.
What is an IVA?
An IVA, or individual voluntary agreement, is a formal and legally binding agreement between yourself and your creditors to pay back your debts over a specified period of time.
An IVA is approved by a court, meaning your creditors have to stick to the agreed timeframe for repayments.
Is it hard to get a mortgage after having an IVA?
Yes, trying to get a mortgage after an IVA isn’t easy. It can be extremely difficult trying to get a mortgage without any assistance since many highstreet lenders won’t offer mortgages to those with bad credit.
Although specialist mortgage lenders work with borrowers who have bad credit scores due to having IVAs, it isn’t as simple as just approaching them and being accepted.
An IVA will usually follow prior credit issues such as late payments, CCJs and defaults. As of this, if you have an IVA you are considered as a high risk borrower to the lenders.
How does an IVA affect a mortgage application?
Having an IVA will limit the amount of lenders who are willing to lend to you, and you will likely have to go to a specialist lender who deals with and can provide mortgages for those with IVAs.
As you will need to go to a specialist lender, you are more likely to face higher interest rates and you may also be required to put down a bigger deposit. However, this will be at the discretion of your lender.
Do you have to declare an IVA on your mortgage application?
Yes, you do have to declare an IVA on your mortgage application.
The application forms come with many questions which you must answer honestly. They are likely to ask if you have had some money trouble in the past, including if you have any debt solutions.
It’s important that you tell the truth on your application, otherwise you will be committing fraud and could end up in more trouble in the future.
How long will an IVA stay on your credit file?
An IVA will stay on your credit file for 6 years, starting from the date it was approved.
The IVA will still stay on your credit file for 6 years even if you do end it earlier; however, it will be marked as complete.
Sometimes, any debts that are recorded in your IVA are recorded as separate entries on your credit file, so this is something to be aware of.
Can you pass a mortgage credit check with an IVA?
While it’s not impossible, it can be extremely difficult to pass a mortgage credit check with an IVA.
An IVA signifies that you have missed a payment in the past, so in the eyes of a lender, you are at greater risk of defaulting on payments in the future. As of this, lenders will likely be hesitant to approve you for further credit.
This is why it is often recommended that you wait until you have completed your IVA before you apply for a mortgage.
How to get a mortgage after an IVA
You’re probably aware by now that getting a mortgage after an IVA is going to be tricky. However, it isn’t impossible.
Prepare your mortgage application
Your mortgage application needs to be right from start to finish, and should always be placed with the right lender. To minimise the risk of being rejected and to find the best options available to you, it’s a good idea to enlist the help of a professional mortgage broker.
Your mortgage broker will be able to find you specialist lenders, since they will have knowledge in the adverse credit market.
At Go2Mortgage, we have a team of expert mortgage brokers who have years of experience helping those with less desirable credit scores find a suitable mortgage lender.
Check your details
Make sure that all of your details are correct and up-to-date as this can have a surprising impact on your credit score.
Registering on the electoral register also ensures that the lenders know you have a stable address.
Pay bills on time
As simple as it sounds, paying your bills on time does help to build up a history of consistent and timely payments. Setting up direct debits is the best way to ensure that everything is paid on time.
How long after an IVA can you get a mortgage?
If your IVA has been satisfied, the longer you wait to apply for a mortgage, the more options you will have available to you. Ideally, when you apply, your IVA will have passed the 6 years mark and so won’t show on your credit report.
A lot of lenders will require your IVA to be satisfied for over 6 years, so if you can wait until then, you will have many more options open to you.
Should you wait until an IVA is settled before applying for a mortgage?
While you can apply for a mortgage while your IVA is still ongoing, you will have a very limited number of lenders willing to lend to you, and your interest rates may be extremely high, if you are able to find a lender in the first place.
Once the 6 years has passed and your IVA is settled, as we’ve mentioned, the IVA will no longer show on your credit file. This makes it far easier for you to apply for a mortgage and be accepted.
How does a mortgage advisor help with IVAs?
Utilising the help of a mortgage advisor when you have an IVA will be a huge help towards your application as they will have expertise in dealing with applicants who have poor credit history.
At Go2Mortgage, we have years of experience securing loans for people in similar situations to you, and we know exactly what support and guidance you will need as you move through the mortgage process.
Get in touch with us today to see how we can help you.
FAQs about Mortgages and IVAs
Will you need a larger deposit if you have had an IVA?
Yes, you will likely need a larger deposit for a mortgage if you have had an IVA. In some cases, lenders may ask to see a deposit as large as 30%, depending on the age and status of your IVA.
The difficulty with having bad credit is that it can be hard to save for your deposit. If this is the case, it may be better to wait until the IVA is settled before you start a mortgage application.
Can you remortgage with an IVA?
You will likely find that having an IVA will affect your ability to remortgage, however, it is worth bearing in mind you will be able to remortgage once the IVA has been settled. This will vary on how long ago the IVA was settled, as well as how much financial equity is in the property and your current financial situation.
Remortgaging will not be a straightforward process and you will likely find that there are only a few lenders available.
Can you get a mortgage if your partner has an IVA?
Yes, you can get a joint mortgage if your partner has an IVA, but it’s worth keeping in mind the IVA will have an equal impact on a joint application as it would an individual one.
A joint application means both parties are responsible for the mortgage payments, so it’s crucial that you consider the implications of any individual financial agreements before making a joint application.
Your partner’s IVA may negatively impact their credit score, making it difficult to get a mortgage. However, if you have a good credit score, this can offset the negative impact of the IVA.
This will depend on the lender and their checks, so it’s worth having a mortgage advisor to help you in this scenario.
Can you get a Help to Buy mortgage with an IVA?
Yes, if you’re looking to get a Help to Buy mortgage with an IVA, there are lenders out there who will consider your application.
However, many lenders will require that your IVA has been settled before you complete your application for the mortgage.