Individual Voluntary Agreements (IVAs) can be an ideal debt solution and an alternative to incurring further unaffordable debt, through high interest loans, such as payday loans. Even with bad credit history, your outstanding debt can be resolved with a formal agreement, such as an IVA, without it resorting to bankruptcy. When it comes to IVAs, debt management plans and outstanding debt, it’s important to consider what kind of impact each could have on mortgage deposits or property terms in general.
Keep reading to find out whether an IVA will have an impact on your joint mortgage.
Do I Have to Declare an IVA on My Mortgage Application?
In short, yes you will have to. If asked directly if you have ever had an IVA, you do have to declare that you have. But if you’re asked if you’re currently in an IVA, you can answer no - as long as your IVA has been completed.
The questions that a broker or lender asks are intended to find out:
- Whether you have had or currently have any debts
- If you’ve used a debt management company in the past
- If you have an outstanding loan of any kind
The broker or lender will definitely check out your credit file, including property rental data and loan documents. Lenders will carry out a credit check on you too. You can check this yourself using credit reference agencies.
However, your credit report is only one of the many components of the lender criteria that mortgage lenders use to determine the success of your application. Some lenders may consider you on the grounds that you’ve been through financial instability but have kept up with your repayments, made amends, and are now more responsible.
You may have heard that lenders will refuse anyone who has had an IVA. This isn’t strictly true – some lenders may refuse those who still have outstanding IVA payments but certainly not all of them. The most important thing is that you don’t lie as it will more than likely be detected and ruin your chances of getting your mortgage anyway. You have to meet a set of criteria that unfortunately changes often, but this depends on the eligibility criteria of the lender you’re applying with.
What Types of Bad Credit Can Affect a Joint Mortgage?
Firstly, the type of credit issues, the severity, and how long ago the credit issues were are all factors that lenders will take into consideration when reviewing your application for a joint mortgage, as well as whether or not the credit issues have been resolved. So, don’t despair if you have a poor credit rating or one or more of the following types of bad credit.
Late payment or arrears: Understandably, many lenders aren’t comfortable with people who have a history of late payments or arrears. The lending criteria is often stricter for people who are or have been in arrears.
IVA or a debt management plan: As we’ve already touched on, an IVA or debt management plan is likely to affect a mortgage whether you’ve got a joint bank account or separate. The affordability criteria is often more flexible when it comes to these repayments.
Repossession: Although it’s likely to be very difficult, getting a mortgage after a repossession is possible. The majority of lenders will assess mortgages after repossession on the basis of the date of the repossession and your current financial position since then (looking at credit agreements, non-priority debts and secured debt).
Bankruptcy: Once you’ve been ‘discharged’ from bankruptcy, you can apply for a mortgage, although the negative impacts on your credit score are going to remain with you for a much longer time, especially when it comes to taking out a larger loan. Advice on how to officially declare yourself bankrupt is available on the Government’s website MoneyHelper.
A larger deposit is one thing that might be required when it comes to applying for a mortgage with a history of bad credit. Depending on property prices, a 20% or 30% deposit might be asked for instead of a more traditional 5% or 10% one. Banks’ number one priority is receiving their money, so taking out a guarantor loan to ensure your bank gets paid on time is also something worth considering.
Would You Be Liable for Your Partners’ Debt?
When you are living with someone, all aspects of your life seem to collide, especially when it comes to bills and living expenses. There isn’t a clear-cut answer as to whether your IVA will affect your partner and vice versa – it is all down to individual circumstances. Usually, one partner is not liable for the debts of the other partner, unless the debt is in joint names, or they have guaranteed the debt on behalf of the other partner. As a result, if someone enters into an IVA, and the other partner is jointly named on the debt, or has guaranteed, then they will be chased for the debt, and will not be protected by the IVA.
One thing to take into consideration is the ownership of assets such as cars when filling out applications for IVAs. Creditors will want to know who owns what and the proportions of these things to ensure that both you and your partner are available to consent to possibilities, such as the property being re-mortgaged or assets being seized or sold. If creditors decide that your lifestyle and expenditure suggest that both you and your partner are jointly responsible for your resources, they will expect to see a breakdown of the full household’s financial position.
Additionally, creditors will want to see your spending and income as a couple. This doesn’t mean that you will be affected by your partner’s IVA, but it is important for them to see how things are distributed from the money coming into the household, including any joint debts, accounts from banks or personal loans. When considering the household income and expenditure, creditors would usually allow an allowance for the partner who is not in the IVA, based on their share of the household income
In summary, it is possible to fully complete an IVA without negatively impacting your partner at all. An IVA set up with a high-quality and respectable company will ensure you’re given the appropriate information and that you’re well aware of how matters relating to assets, expenditure and income will impact you and your partner before you enter into any agreements.
Get the Help You Need
Get in touch with NDH Financial today for your free IVA consultation. All you need to provide is your estimated debt level, if you’re behind on payments, your employment status, where you live, and your basic contact details to get started.