Can I get a Mortgage during an IVA?

Get a mortgage during an IVA Getting a mortgage during an IVA is possible. However you will only be allowed to do so for very specific reasons and if you and your property fit certain criteria.

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Can you get a mortgage during or after an IVA?

Getting a mortgage during an Individual Voluntary Arrangement (IVA) is difficult. An IVA will make your credit rating worse. Can you get a mortgage during your IVA? Will you be able to apply for a mortgage once your IVA is finished? To find out more please visit: http://beatmydebt.com/individual-voluntary-arrangement/how-will-an-iva-affect-my-credit-rating

Is it possible to get a Mortgage during an IVA?

Getting a mortgage during an IVA is not easy. The first reason is your poor credit rating. High street lenders are generally unwilling to help because of this. You will therefore need to use an adverse lender.

Adverse lenders charge a higher rate of interest than those on the high street. As a result the repayments can be considerably higher. In addition they generally have stricter acceptance criteria.

The second issue is you are not allowed to borrow during your Arrangement without getting prior agreement from your Insolvency Practitioner (IP). If you do it could result in the failure of the agreement.

Your IP will usually be unwilling to let you get a mortgage during your IVA unless the purpose of doing so is to release equity from your home to settle the Arrangement.

Can you release equity to Settle your IVA early?

If you have started a monthly payment IVA it is likely to last 5-6 years. However it is possible to settle the Arrangement early. You can do this by offering a cash lump sum in place of the ongoing payments.

If you are a home owner you could raise a lump sum by releasing equity from your property. Adverse lenders are often prepared to lend to you for this purpose. Your IP should also agree if the offer is reasonable.

Of course you must have equity in your property. If you are in the first 2 years of your IVA you will only be able to borrow more if your current equity is greater than 25% of the value of the property. Over 2 years in this falls to 15%.

The terms of your IVA will normally state that you will always have to attempt to release equity from your property in the 5th year of the Arrangement.

Is it possible to Move House during an IVA?

If you are already home owner moving house during your IVA is not straight forward. Firstly you will not be able to sell your property without the agreement of your IP.

They will usually be happy for you to sell if you intend to use any equity released to settle your agreement. However if you want to use it to buy a new house they may not been so keen unless the move is critical for some reason.

Even if your IP is supportive it may be impossible to find a lender. Adverse lenders often only want to help if if the purpose of the mortgage is to settle your IVA.

If you have to move during an IVA but are unable to get a mortgage you may need to consider selling your property, settling the Arrangement and then going to rented accommodation for the time being.

Could you buy your first Property during an IVA?

If you are currently renting you might be thinking about buying a property during your IVA. Your IP may well support this if it means your expenses fall overall. Such a change would mean your creditors would benefit as the payments you make to them could increase.

However if you are in an IVA getting a mortgage to buy your first property is not normally possible. Firstly you will need a deposit. This would have to be provided by a third party as you will struggle to save a sufficient amount to fund it yourself.

Secondly it is unlikely that you will find a lender who will help. The adverse lenders available are normally only prepared to lend for the purpose of remortgaging to settle the IVA.

If you are living in rented accommodation it is usually best to concentrate on finishing your IVA before thinking about buying a home. Even if a suitable deposit could be raised you will struggle to find a lender who will help.

Your home may be repossessed if you do not keep up repayments on your Mortgage or other loans secured upon it.

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8 thoughts on “Can I get a Mortgage during an IVA?

  1. Emma says:

    Hi I’m currently 2 years into my Iva.

    I want to get a mortgage to buy the property I am currently renting but have no clue how the IVA will effect me. Once I’ve finished my Iva would I be accepted for a mortgage? Are there companies that accept you for a mortgage while on an Iva?

    I’m in council property so would be hoping by for right to buy, any advice you could give would be great.

    1. Hi Emma

      It is not usually possible to get a mortgage during an IVA to buy a property. As discussed in the article above lenders will normally only consider working with people who are already home owners – remortgaging to release equity with the purpose of settling the IVA early.

      Given you are looking to buy your Council property there are lenders who would consider you for a right to buy mortgage after your IVA is completed. However you need to wait until the record of the IVA has come off your credit file. This happens on the 6th year anniversary of the start date.

  2. Helen says:

    Hi, myself and my partner are currently looking to buy our first home. I am currently in an IVA however my parter has a good deposit and is taking out the mortgage alone. How will this affect my IVA if I become a joint owner of the property?

    1. Hi Helen

      I would strongly advise you not to become an joint owner of a property while you are in an IVA. If you did it would become an asset. You might then be forced to release equity from it as part of the Arrangement. It would be far better for your partner to buy the property in his name and then add you to the mortgage / deeds later on once your IVA is completed.

  3. Colin Roberts says:

    Hi, my partner and i live in rented accomodation, i have 3 yrs left on an iva, my partners father has offerd to give us money for a deposit and be a guarantor, my monthly payments will be no more or less than i am paying now renting, is this possible on an iva and if so can you get a decent rate with a guarantor? Thanks

    1. Hi Colin

      Unfortunately it will not be possible for you to get a mortgage to buy a property while you are in an IVA. The issue is that mortgage lenders will only consider people who are in IVAs if the purpose of the mortgage is to release equity from their current property to settle the arrangement early.

      My advise to you would be to concentrate on completing your IVA first. Could your partner’s father help with a lump sum to allow you to do this? Having said that even if you do settle early the best change you have got of getting a mortgage will be to wait until the record is no longer on your credit file.

  4. Lina James says:

    If i do a settlement agreement on my IVA, can i then apply for a mortgage of will i be able to get one?

    1. Hi Lina

      The answer to your question is no. It is a common misconception. The record of your IVA will remain on your credit file for 6 years from the start date whether you settle your IVA early or not. You will not be able to get a mortgage with a high street lender until this record comes off your file. Settling the arrangement will not speed this process up in any way.

      That said there are other reasons why settling an IVA is a good idea. For one you no longer have to maintain the monthly payments and any pay increases or windfalls after it is completed are yours to keep.

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