Getting a mortgage during an IVA is possible. However you will only be allowed to do so for very specific reasons and if you fit certain criteria.
Included in this article:
- Is it possible to get a mortgage during an IVA?
- Could you buy your first property?
- Can you settle your IVA by releasing home equity?
- Can you move house?
Want to get a mortgage during an IVA? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts
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.
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 because your mortgage payments would be less then your rent.
However getting a mortgage to buy your first property during an IVA is not normally possible. Even if you have a deposit in the current mortgage market is is unlikely any lender will help you.
If you are living in rented accommodation it is best to finish your IVA first before you think about buying a home. If you want to take advantage of a council right to buy scheme you will also have to wait until the record of the Arrangement comes off your credit file.
Adverse mortgage lenders are normally only prepared to lend for the purpose of remortgaging to settle an IVA early.
Can you Settle your IVA early by releasing home equity?
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 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 after the 54th month 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.
Interested in the options for mortgages during an IVA? Give us a call (0800 077 6180) or complete the form below to speak on one of our experts.
Privacy Policy Arrange a call with an IVA Expert
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.
If i do a settlement agreement on my IVA, can i then apply for a mortgage of will i be able to get one?
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.
Hi, I am currently 2 years into my IVA. My partner has a good credit rating and a deposit but is a student so has no regular income. I am employed full time. Last year we managed to be able to rent a property even though I was on an IVA. We are wanting to get a mortgage through shared ownership but not sure how to go about it with me being on a IVA. And advice would be appropriated.
Hi Reece
Unfortunately in the current mortgage market it is not possible to get a mortgage for the purposes of buying a property while you are in an IVA. The only option would be if you were already a home owner and wanted to remortgage to release equity to settle the IVA early.
Given you are currently renting you will need to wait until your IVA is completed before thinking about getting a mortgage. On top of this if you want to get a shared ownership mortgage you will need to wait until both your IVA is finished and the record has come off your credit file (6 years from the start date).
As with previous questions, I am on an IVA but my husband (who is the main earner in the household) is hoping to get a mortgage with the shared ownership scheme, this will be less that what we currently pay in rent. He has a deposit and good credit rating. If he solely applied for the mortgage and buys the home in his name only, will my IVA affect our chances of him being approved for this?
Hi Emily
The fact that you are in an IVA should not prevent your husband from getting a mortgage in his name. Your IVA does not affect his credit rating. The only thing is your income cannot be included for affordability purposes. But given he can afford the mortgage on his own this should not matter.