If you are trying to buy a home when you are repaying your IVA, then you should know that your chances of obtaining a mortgage are slim. Your original creditors may wonder how you are able to afford a property when you are already paying them back, and new creditors may not be likely to give you a mortgage if you have significant debt. If you apply for your mortgage when your IVA has been completed or settled, then this will drastically improve your chances.

Source: Pexels (CC0 License)

Getting a Mortgage with an IVA?

Some lenders will refuse anyone who has ever had an IVA. Others will only lend to you when you have had your IVA removed from your credit file. This usually happens after six years. There are a number of lenders who are more than willing to consider you as a mortgage applicant if you have an IVA that is over three years old. It’ll need to be fully settled and you will have had to show some improvement in your credit history.

If you are in a situation like this, then you may be asked to provide the bank with a bigger mortgage deposit. You may also find that you are charged with a higher mortgage interest when compared to those who have very good credit. If you have had a lot of debt issues in the past, then it may be wise for you to think about going through a broker.

What Deposit Will I Need for a House with an IVA?

The deposit you’ll need will usually depend on how long it has been since your IVA was settled. After the six-year period is up, you will no longer have an IVA on your credit history. You may even be able to get a mortgage with a small deposit of around 5% or 10%. If the IVA was settled in the last three or four years, then a lender may want to have a higher deposit, between 15% and 25%.

This is because you’re seen as being riskier in the eyes of a mortgage lender. When you are given a large loan, there is a risk that your property could fall below the mortgage you have taken out. If this was to happen, you’d be in negative equity. If you fall short when it comes to your repayments and the lender has to then repossess your home, they may not be able to cover the loan. For this reason, lenders are only willing to give 95% mortgages to those who have a very good credit history. If you have an IVA then you are already seen as being “risky”, so you may be looking at a higher deposit to try and mitigate this risk.

Will a Windfall Clause Prevent Me From Getting a Mortgage?

A windfall clause is usually implemented when taking out your IVA to ensure that if you did come into a huge amount of money, that it is going to be given to the creditor. Creditors will expect 100% of this payment to be offered, although sometimes they will accept a lower amount. Windfalls can include cash sums that were unexpected, such as lottery wins, insurance payouts or even money from an inheritance.

If during your IVA you are able to gather enough cash for your deposit, your creditor may well ask where the money came from. If the money has been saved over a period of time, creditors may query how the funds have been saved when your monthly contributions should represent your disposable income.  If the funds are being gifted by a third party, then potentially these are funds you are becoming entitled to after the IVA has been approved, and should be paid into the arrangement.

Can I Get a Mortgage After an IVA?

Trying to get a mortgage after an IVA is really not easy. It is very difficult to go at this alone because a lot of high-street lenders will not give a mortgage to those who have bad credit. If you want to increase your chances while having your IVA on record, then one thing that you can do is try to go through a specialist lender or broker. Although specialist lenders or brokers do work with those who have had an IVA, it’s not always a simple process.

How Long After an IVA Can I Get a Mortgage?

It becomes easier for you to get a mortgage after an IVA if you simply wait a couple of years after it has completed. If you apply right away, then you may find that you face a number of issues. This could include higher deposits, higher interest and also the possibility of rejection. The main reason for this is because your IVA is impacting your credit history and it is fresh in the eyes of your lender.

In most cases, the longer you are able to wait for your mortgage after your IVA, the more likely you are to be accepted. If you are looking to remortgage, there are more lenders who would be willing to give you a mortgage if you have an IVA, as long as it is three years old. You will usually need to show that you have kept up with the payments and there should be clear evidence that you have done everything you can to build your credit score.  The IVA will have an effect on the terms offered, which will usually result in an increased interest rate.

How will an IVA Impact My Credit Rating for a Mortgage?

If you do get an IVA, then this will absolutely go on your credit report and impact your credit score as a result. In most cases, your credit score is a three-digit number that ranges between 1 and 999. The higher your score is, the more likely lenders are to see you as a low-risk borrower. This opens up your options when it comes to mortgage deals and other lines of credit, and therefore, a lower score will reduce the number of mortgage deals that are available. 

There are a number of credit reference agencies and independent bodies that give you the chance to check your credit score. This would include Experian, Equifax and TransUnion. It is difficult to provide the exact number that your credit score will be reduced due to the IVA, as your credit score will depend on a number of factors, however, in most cases your credit score will be reduced as a result of the IVA.

Do I Need to Declare My IVA when Taking Out a Mortgage?

Yes. Mortgage applications come with a lot of questions, and a broker will expect you to be honest when you are answering them. This could include whether or not you have had money issues in the past and if you have ever had to use a debt solution. Even if the IVA has gone from your credit report, you will still need to tell them about it if they ask. Not doing so could mean that you commit fraud.

Please note, the above does not constitute mortgage advice, and only intends to advise on the implications of an IVA.  When considering a mortgage, it is recommended that you seek specialist advice from a broker or financial advisor.