IVA Mortgages

Here are some of the risks you present to creditors with an IVA:

1. Reduced Repayments

Creditors will likely receive a smaller portion of the debt they are owed compared to if they pursue full repayment through other means like bankruptcy.

2. Uncertain Outcome

There’s a chance that you might not be able to keep up with the IVA payments. If this happens, the IVA could collapse, and creditors may then resort to bankruptcy proceedings.

3. Administrative Costs

The process of setting up and managing an IVA incurs fees for the Insolvency Practitioner handling the case. These fees come out of the money paid by you towards your debts, meaning creditors receive less overall.

Since an IVA requires creditors’ agreement, they will weigh these risks against the potential benefits of receiving some repayment through a controlled process.

Passing a credit check with an active IVA is quite difficult because it indicates past struggles with managing debt. An IVA lowers your credit score due to missed payments that led to the arrangement. Lenders see an IVA as a sign that you may be more likely to default on future repayments, making them hesitant to approve new credit.

However, getting a mortgage with an IVA is not impossible. Mortgage Decisions team can help you with an application and find the best product for you.

The only way an IVA will affect your partner’s credit is if you and your partner have joint financial accounts. For example, if you have any joint debts included in your IVA, the other person named on the debt will still be liable for their share.

However, if you’re applying for a mortgage together where you don’t have any shared debts (e.g., renting a place where you’re not on the same lease agreement), the impact will be less severe.

The waiting time to get a mortgage after an IVA can vary, but there are generally two benchmarks:

1. Credit File Removal

An IVA will typically stay on your credit report for six years from the start date or until it’s completed, whichever takes longer. Once it falls off your credit report, applying for a mortgage becomes easier.

2. Lender’s Requirements

Some lenders will prefer to wait for a period beyond the six years on your credit report. This wait time can vary from lender to lender, but it often falls in the range of 3-5 years after the IVA’s completion.

To remortgage with an IVA you will need consent from an Insolvency Practitioner (IP). They will assess the situation and may only agree if it benefits the overall IVA goals. Your IP will need to ensure you can afford both the increased mortgage payment and your IVA contributions.

There are two scenarios where remortgaging with an IVA would be more likely:

• If have equity in your property and remortgaging would free up funds to pay off a lump sum towards your IVA debts, your IP might approve.
• If you are planning to downsize to a cheaper property and release equity to cover the difference, your IP may be more inclined to allow a remortgage.

Even with your IP’s permission, getting a lender to approve your remortgage with an IVA on your record can be challenging, but rest assured, we are here to help.

Yes, you have to make your mortgage company aware that you have had an IVA, even if it has been removed from your credit report. There is a legal requirement to be truthful and transparent in your mortgage application. Failing to disclose an IVA is considered mortgage fraud, which can lead to your mortgage application being rejected.

Since you are considered a higher risk borrower, you are very likely to need to pay a larger deposit and a higher interest rate for an IVA mortgage. A bigger deposit demonstrates financial stability and reduces the amount they are lending you while higher interest rates compensate the lender for the increased risk of lending to you.

In most cases, you won’t necessarily have to remortgage or sell your property to complete an IVA (Individual Voluntary Arrangement). However, the potential for needing to do so depends on the amount of equity you have in your property. If you have more than £5,000 of equity, the IVA may require you to release some of this equity through remortgaging.

The released funds would then be used to contribute more towards your debt repayment within the IVA. If your equity is under £5,000, no further action is needed as you have fully complied with the terms of your IVA. This means you won’t need to remortgage your property.

Yes, you can sell your house after you’ve successfully completed your IVA. Once the IVA is finished, the property is entirely yours to sell without restrictions from the IVA.

If you want to sell your property while you’re still in an IVA certain conditions may apply. The amount of equity you have in your property will influence the selling process.

If you have very little equity, selling the house might not significantly impact your IVA as there wouldn’t be much leftover after paying off the mortgage.

If your equity is more than £5,000, the released funds from selling the house will likely need to be used to contribute towards your IVA debt repayment. You will need your Insolvency Practitioner’s (IP) consent before proceeding with the sale. They will need to ensure the proceeds are used appropriately within the IVA framework.

Rebuilding your credit score after an IVA takes time and dedication, but there are several steps you can take to improve it.

1. Be patient.

It typically takes 3-4 years, and sometimes even longer, to see significant improvement after an IVA. Focus on consistent positive habits.

2. Check your credit report regularly.

Obtain a free copy of your credit report at least once a year (more if possible) from a credit reference agency like Experian or Equifax. Ensure all information is accurate and address any errors promptly.

3. Register on the Electoral Roll.

Being registered at your current address helps lenders verify your identity and stability.

4. Manage your credit responsibly.

• Consider applying for a credit card specifically designed for people rebuilding credit. These often have lower limits but use them responsibly, pay your balance in full each month, and avoid exceeding the limit.
• Some stores offer credit cards with small limits. You could use them for regular purchases and pay them off in full each month to demonstrate responsible credit management.
• Always pay your bills (phone, utilities etc.) on time or even a few days early. Payment history is a major factor in credit scores.
• Resist taking on new debt, especially high-interest loans. Focus on paying down existing debts strategically (consider methods like the debt avalanche or snowball).
• Be a guarantor for someone reliable. If you have a friend or family member with good credit who is applying for a loan, you could become a guarantor for them. As long as they make payments on time, this can benefit your score.
• Avoid multiple applications. Don’t apply for multiple lines of credit in a short period. Each application can trigger a hard inquiry which can slightly lower your score.

Rebuilding credit score takes time and consistent effort. Don’t get discouraged by slow progress and stay committed to responsible financial management.

By following these strategies and demonstrating a positive credit history over time, you can gradually improve your credit score after an IVA.