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Buying a home is a dream for many but, for those with high amounts of debt and poor credit ratings, getting a mortgage may feel impossible. An IVA could be an option that helps you get on top of your debts to start making that dream a reality.
While the IVA is in effect, it’s very unlikely you’ll be approved for a mortgage. It is possible to get a mortgage after an IVA, but this depends on your circumstances. To decide whether you would benefit from an IVA you will need to ask yourself if an IVA is right for you.
An IVA stands for individual voluntary arrangement. This is a formal and legally binding agreement between you and your creditors to pay back debts. This means it is approved by the court so both you and your creditors have to stick to it.
IVAs are popular because they freeze interest and charges, meaning you pay back just one affordable monthly repayment and can write off a significant amount of debt. See how much debt you could write off with our IVA calculator.
While you are on an IVA the chances of you getting a mortgage are, unfortunately, very slim. Any credit you want to obtain while on your IVA, worth more than £500, has to get written approval from your insolvency practitioner. As the whole point of this agreement is to help you get back on top of your finances, taking out a mortgage may put the IVA in unnecessary risk.
Even if the insolvency practitioner signs off your mortgage request, finding a lender willing to give you a good deal will be extremely challenging. As a result, it seems very unlikely you’ll be able to get a mortgage while on an IVA. However, if you are currently renting a property on an IVA then the agreement will not impact your housing situation.
It’s worth considering if your mortgage application would have been approved before the IVA. For example, although providers can see the agreement on your credit report – and see you’ve had problems repaying lenders – this is arguably better than still owing large sums to multiple creditors.
Although you can make an application with your current financial situation, if you’re still struggling to repay what you owe, adding a mortgage to the mix would only likely cause additional problems. In this situation, providers would probably also refuse your request.
Getting a mortgage after an IVA – when you’re in better financial shape – should result in you getting better rates and deals.
In essence, yes you can get a mortgage after an IVA. However, if you apply immediately after you’ve completed your IVA, you may not get the most competitive mortgage rates and might have to go to a specialist mortgage lender.
It’s probably best not to start your mortgage application straight away. While it’s understandable wanting to get on the property ladder as soon as possible, you should wait until your credit score starts improving.
An IVA will stay on your credit report for six years after the arrangement was approved. During this time, lenders can still see the agreement and will probably be reluctant to offer credit. If you focus on building your credit score though, you’ll start eventually gaining access to better offers.
Mortgage applications and rates vary from person to person. However, with a specialist IVA mortgage lender, any offer you receive will likely have a higher rate of interest applied to it. You will also probably find that the amount of deposit you’re asked to pay upfront will be higher than normal.
However, if your current financial circumstances indicate you can afford to keep up with the repayments, you may be able to secure the mortgage.
An IVA will stay on your credit file for the duration you are on it, which is usually 5-6 years. Once it has been completed it will be removed your credit report and you’ll be taken off the Insolvency Register. Even if you complete the IVA early it will remain on your credit file for six years from the date it was approved. However, it will update to say it has been completed.
What deposit you will need if you’ve had an IVA depends on how long it has been since you completed it. After six years the IVA will have disappeared from your credit history and you might be able to get a mortgage with a deposit of 5-10%. However, if it has been just three or four years you may be looking at a higher deposit of 15-25%.
If you currently have a mortgage, your property could be affected if you choose an IVA. During the final year of the agreement, you might have to re-mortgage your home if it possesses more than £5,000 worth of equity.
If this isn’t possible, you may need to extend your IVA by another twelve months.
Many mortgage lenders ask if there have been credit issues in the past such as entering into an IVA or declaring bankruptcy. Even if the IVA is off your credit file, you must let them know if they specifically ask. Do not lie to lenders as this could cause you even more trouble in the future.
If you have any questions about how an IVA will affect you, or your mortgage application, get in touch with one of our advisors today. We’ll be happy to examine your circumstances and determine whether an IVA is the best solution for you.
Debt write off applies to unsecured debts and on completion of an IVA. A debt write off amount of between 20% and 80% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors.
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