One of the most commonly asked questions is whether you can get a mortgage after an IVA. An IVA can help you get out of any debt you might have – but are you able to get a mortgage after an IVA? While it may be a little trickier to get it all signed off, it’s not impossible to do. Let’s take a look.
What is an IVA?
An IVA is an Individual Voluntary Agreement, and it is effectively an agreement between someone who is in debt and their lenders, with the aim of staving off bankruptcy. If you’re not able to pay off your debts in full, an IVA allows you to come to an agreement with the lenders to freeze any interest you’re accruing, as well as to reduce the amount owed.
The first step with an IVA is to employ an insolvency practitioner who will petition your debtors on your behalf to agree to a repayment schedule that you can afford. Depending on the amount of debt you owe, this could last for several years, with monthly payments being made until the amount is paid off.
IVA and your Credit Score
IVA’s will affect your credit score for several years. If you have an active IVA, your chances of getting a loan, or opening a credit card account will be significantly reduced – this includes your chances of getting a mortgage approved as well.
An IVA will remain on your credit history for at least 6 years, starting from the date the IVA commenced. During this time, it will be tricky to get any sort of loan or enter any kind of credit agreement. When the IVA is settled, you’ll receive a completion certificate, which will also end up on your credit report.
IVA and Mortgages
The chances of getting a mortgage with an open, unpaid IVA are slim – your original creditors may question how you can consider owning a home when you still owe money, and if these debts are significant, the mortgage lenders will be less likely to lend for a mortgage.
Even after your IVA is finished, there are some lenders who will refuse your application, and some who may only consider lending after the IVA has been expunged from your credit history after the mandatory 6 year period.
That being said, there are lenders out there who are open to considering a mortgage application if the IVA is at least 3 years old, and is fully settled. In these instances, you may be asked to make a larger mortgage deposit, and you may also get a higher mortgage interest rate too. This is because the lender considers you a riskier bet, as you’ve had debt troubles in the past.
Improving your Credit Score after an IVA
The best way to guarantee getting accepted for a mortgage after an IVA is to try and improve your credit score. This will happen organically after your IVA has been paid off, but it’s worth noting that even after 6 years when the IVA has been removed from your credit history, your score may still not have properly recovered.
Your credit history will also be quite slim due to the fact that you haven’t been able to borrow during the IVA, so lenders won’t have a lot to go off to try and judge your creditworthiness. It’s worth waiting for the IVA to drop off your credit history before considering a mortgage, as you may not have the necessary savings to put towards the mortgage deposit throughout that time.
Speaking with a specialist broker who is experienced with IVA mortgages and criteria means you can see what your chances of acceptance are before you approach providers. They can put you in front of the right lender based on your individual circumstances from the start.