The Rules for Getting a Mortgage After an IVA

Are you keen to learn more about getting a mortgage after an Individual Voluntary Arrangement (IVA)? Then you have come to the right place. This article aims to help you understand the rules for 2023 and beyond.

We understand that debt can be a tough challenge, but remember; you’re not alone. Every month, over 170,000 people visit our website looking for guidance on debt solutions. StepChange stress the need for professional debt advice, noting that 60% of adults in financial trouble hesitate to seek help.¹

This is why, in this friendly guide, we’ll talk about:

• What an IVA is and why it could help you.
• How you can still get a mortgage even with an IVA on your credit history.
• The things lenders look at when deciding to give you a mortgage.
• How long an IVA stays on your record.

We also have first-hand experience with debt challenges. We know it’s not easy, but we’re here to help. Our aim is to make the process clearer and less scary for you.

Let’s dive in.

Can You Get a Mortgage After an IVA on Your Credit History?

If you’re still bound by an IVA, you won’t be able to get a loan without the consent of your insolvency practitioner.

Creditors will be looking at your credit report and your income to determine if you’re a reliable investment.

If a creditor believes that you have the assets and the financial security to pay them back, you can convince them to lend you even with an IVA.

It’s very important to pay back all your payments on time, so that your credit rating improves.

Your creditors may want to express their doubts about your ability to pay them back in the form of tighter terms and conditions and maybe even high interest rates.

While it is possible to get a mortgage after an IVA on your credit history, it is certainly not easy.

Mortgage loans are usually very flexible, so it’s probable that you’ll get one if you play your cards right.

Creditors will be looking at your consistency and whether you can keep up repayments.

Here’s some useful advice: if you’re making all your payments on time and can demonstrate that you have assets or a secure, unwavering regular income, creditors may be willing to loan you.

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Why Does an Individual Voluntary Arrangement Affect My Mortgage Application?

To put it very simply, it affects your mortgage application because to most lenders, it signals financial turbulence on your part.

That signifies to them that you may be a risky option to loan to, especially for loans as large as mortgages.

Creditors will be putting a lot of money towards mortgage loans, so they’ll want to scout for borrowers that will seem like safe options and will be able to pay them back.

IVAs do affect your credit file negatively.

SInce your credit history is typically the first thing creditors look into when they’re deciding if they should loan you or not, IVAs can be a turn-off for lenders.

They’ll understand that you may have a lot of trouble paying them back, especially if your insolvency solution is recent and if you’re shown irresponsible financial conduct.

Your possible options for getting mortgage loans after IVAs would be banks, a mortgage broker, or direct mortgage lending. You should also seek as much debt advice as possible. Good advice is often the key to a successful mortgage.

If you have a poor credit rating, you may want to check out creditors who give loans specifically to people with bad credit and are authorised and regulated by the financial conduct authority (FCA).

Key Financial Points Creditors Will Look at while Lending

This section will address the various financial points that potential lenders will look at when they’re deciding on whether to loan you or not.

Income To Expense Ratio

The first indicator they’ll look at is your income-to-expense ratio. The reason why is because this ratio is a prime indicator of how fiscally responsible you are.

If they find that your income is much larger compared to the amount you spend on your utilities and other expenses, you’ll find that they’ll be a lot more willing to loan you than if they find that you’re struggling with your finances.

The larger the income-to-expense ratio, the better it is for you.

Source of Income 

The second thing most creditors will be looking at is the source of your income.

They’ll want to assess how stable the source is and how much it can potentially vary over the coming years. 

If they find that all or most of your income comes from a shaky source, they obviously won’t be very willing to loan you. 

A mortgage loan requires a lot of long-term financial stability, and the best way to exhibit that is to show that you have multiple stable sources of income that won’t go away for a considerable period.

Wealth Statement

The final indicator mortgage lenders will be looking at when considering whether to give you a mortgage loan is your wealth statement.

Your wealth statement represents all your existing or recently acquired assets, any liabilities, and your expenditure across the entire year.

In that essence, your wealth statement tells creditors your actual income.

The Average IVA Debt

To help you better understand your current situation and give you the right information to make a decision, here’s the average IVA debt, including monthly payments and the usual lifespan of the debt.

How Can You Avail a Mortgage after an IVA?

An IVA is listed on your credit report for a period of six years after it first becomes valid.

As long as it remains on your credit report, potential lenders may be put off by its presence. If your IVA is relatively new, it’ll have a much larger impact than if you’ve had it for four to five years.

If you’ve got an IVA listed on your credit report, it may become very difficult to apply for a mortgage as long as it’s valid.

IVA mortgages may be uncommon, but they’re not unprecedented.

You may come across lenders that refuse to lend someone if they’ve ever had an IVA listed on their credit report, regardless of whether it is valid or not.

On the flip side, you’ll find lenders that are willing to consider your application for a mortgage only after your IVA expires. Applying for a mortgage after your IVA expires can certainly improve your chances of getting one.

You’ll find that your chances will vary depending on how big a deposit you’re willing to pay. Some creditors may ask for a larger deposit than usual based on the fact that you’re under an IVA. You may have to pay a larger deposit because of your IVA.

If you’re lucky, you’ll come across lenders and creditors who will be willing to loan you even if your IVA is still active.

This does have slim chances of happening, but there are a few unwritten prerequisites that, if you meet, will help you increase your chances of getting a loan.

A lot of lenders may be willing to consider your mortgage application if your IVA is fully settled, at least three years old, and if you’ve actively improved your credit rating by making regular payments and engaging in other financially responsible activities.

References

1. StepChange – Credit safety net report