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.
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Hi,
I completed my IVA 2 years early paying it off with money from my parents. I has been nearly 2 yrs since I paid it off. The IVA has been taken off the insolvency register but is still showing on my credit file. Is this something that should have been taken off my credit file earlier?
I am aware that IVA can show for up to 6 yrs, just wondered as its off register. My Iva started Oct 13 and paid off Oct 17. Am I able to get a normal mortgage or would I have to use a specialist lender?
Hi Rob
The record of your IVA must remain on your credit file for the full 6 years whether you pay it off early or not. You are right the record comes off the insolvency register approx 3 months after you receive your completion certificate. However the record on your credit file must remain until the 6th year anniversary.
As such in your case the record will be removed from your credit file in Oct 19. Until this happens it will be very difficult and expensive for you to get a mortgage. As such my best advice would be to wait until October this year and then start looking.
Once the record has come off your credit file there will be some high street lenders who are willing to lend to you. However must will not so the best thing to do will be to get help from a specialist mortgage broker. Please get in contact with us again in October and we will be happy to suggest an appropriate broker who can help you.
Hello there,
I’m currently on an IVA in the uk. My wife is from Portugal and I have been offered a mortgage there pending me providing my Credit record from the uk. I earn c£55k pa.
What can I do here? This is the final phase. Would they reject it once I send them a report with an IVA?
Many thanks
Hi Ivoum
The first thing I would point out to you is that the terms of your IVA will quite clearly state that you MUST NOT take further credit during the Arrangement without getting the agreement of your IVA company. This means both credit in the UK and abroad.
If you tell your IVA company I think they say that you cannot take this mortgage. If you don’t tell them and take it anyway they are likely to find out if you are sending money back to Portugal each month to cover the mortgage payments as they will show up on your bank statement. In addition if you go ahead anyway and do not tell them how will you afford to pay mortgage payments in Portugal given you are paying all your spare income into your IVA?
Secondly I would think that as soon as the bank in Portugal see you are in an IVA in the UK they will refuse your application. This may not happen but if they do accept you I would think very carefully before you go ahead. If you take the mortgage and buy the house and your IVA company in the UK find out they are likely to terminate your IVA….
Hi James we are being gifted our fathers house but we are on a iva. We need to borrow 130k against the property. What’s yours advise
Hi Mary
You will only be able to remortgage your property if your IVA is settled as part of the deal. As such I suggest you speak to your IVA company and agree with them the amount you will need to raise to settle your IVA. It might be possible to raise over and above this amount for your own purposes however the two have to go hand in hand.
Once you have some idea of figures from your IVA company please do contact me and I would be happy to discuss your options (0800 077 6810).