An Individual Voluntary Arrangement (IVA) can help you repay your debts through affordable, monthly payments but it can also make it difficult to get a mortgage.
This is because, when assessing your mortgage application, mortgage lenders will check your credit history for evidence of a debt solution. If they find an active or past IVA, this can heavily influence the their decision to approve you for a mortgage.
It is, in no way, impossible to get a mortgage after an IVA but it can be challenging and take longer than if you didn’t have an IVA.
In this guide, we’ll explain what an Individual Voluntary Arrangement is, how long it will stay on your credit report, and how it will affect your chances of getting a mortgage.
What is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors to pay your debts in monthly payments over a fixed period of time (usually between five and six years).
It is arranged by an Insolvency Practitioner licensed by the Insolvency Practitioners Association who will assess your financial situation and establish a suitable payment plan that you can comfortably afford. It must also be approved by a court and recorded on the Insolvency Register before it can be confirmed.
If the IVA is accepted by your creditors, any interest and charges on your debts will freeze and lenders will be prohibited from taking further action against you whilst you are actively making debt repayments.
It must also be paid directly to your licensed Insolvency Practitioner who will act as an intermediary to split and distribute the money amongst your creditors and deduct a fee.
If you have any unpaid debt when your IVA comes to an end, it will be cleared, and you will be presented with a completion certificate (a formal document to prove you have completed your IVA successfully).
Why choose YourDebtExpert?
How does an IVA affect my credit rating?
If you get an IVA, it will be recorded on your credit report and have a knock-on effect on your credit rating. This is because your credit score is directly based on the information contained within your credit report.
This can make it difficult to borrow money or get a mortgage down the line regardless of whether you still owe money or have already completed your debt solution.
It is, however, worth remembering that all debt solutions affect your credit record and your chances of getting a mortgage.
How long will an IVA stay on my credit report?
If you enter into an IVA, it will stay on your credit report for six years from the date it is officially registered and can be accessed by visiting any of the main credit reference agencies (Experian, TransUnion, and Equifax) during this time.
If you settle your IVA in less than six years, it will still be recorded on your credit file and only removed when you have paid your creditors and the six-year period has come to an end with most debt solutions visible on your credit file for a minimum of six years.
If the six-year term has come to an end, however, you may still be required to inform lenders of any debt solutions, such as IVAs and Debt Relief Orders, that you have entered into in the past whether it was six or sixteen years ago.
Can I get a mortgage with an active IVA?
If you have an active IVA, it is possible to get a mortgage at the discretion of your Insolvency Practitioner, but you may require the services of a specialist lender with specialist lenders more likely to accept mortgage applications from IVA holders.
This is because, whilst you are actively repaying your debt, your credit rating will be negatively impacted for at least six years and lenders may deem you too high-risk for credit cards, loans, and mortgages during this time.
Can I get a mortgage after an IVA?
It is one of the most frequently asked question amongst people that have successfully completed an IVA but whether you can get a mortgage after an IVA depends on your individual financial situation.
If you have recently completed an IVA and are curious about your chances of getting a mortgage, you must seek professional advice from experienced mortgage advisors to find out what your options are and what your next steps should be.
It is the role of specialist lenders to work with borrowers with a history of poor credit or debt solutions, such as IVAs, but the process can still be extremely difficult and time-consuming from start to finish.
Do I have to declare an IVA in my mortgage application?
In a word, yes. When you are completing a mortgage application, you are legally obliged to declare an IVA even if your lender doesn’t ask.
This is because an IVA can impact the lender’s decision and help them decide whether you are likely to make your monthly payments or are at risk of defaulting.
If you have experienced debt problems in the past, such as a debt management plan or bankruptcy, you must declare this information to ensure your lender is fully aware of your financial circumstances before they take your mortgage application any further.
How we helped Paige
It was literally the best decision of my life, and it has actually changed my life, cheesy as that sounds, it has changed my life.
Paige , IVA Customer
What happens if I don’t declare an IVA to my mortgage broker?
When it comes to mortgage applications, it is important to tell the truth at every step of the way.
It can be tempting to lie or omit seemingly unimportant information, such as declaring an IVA to your mortgage broker, but this is classed as fraud and can land you in serious trouble down the line.
If you have an active IVA, for example, you may struggle to stay on top of your monthly debt repayments and end up defaulting which can lower your credit score, make it difficult to borrow money, and, in the worst-case scenario, perhaps even cost you your home.
Tips on how to get a mortgage after an IVA
It can be difficult to get a mortgage after an IVA but by seeking professional advice and choosing the right lender, it is possible.
Give it time
The most important thing to remember when getting a mortgage after an IVA is to give it time. It will take longer than a standard mortgage application because mortgage lenders will require more time to assess your credit history and make a decision.
Continue improving your credit file
In the meantime, there are steps you can take to improve your credit file even if your IVA is still visible on your credit history.
This includes registering on the electoral roll at your current address, paying your household bills in full and on time, and only applying for small credit lines.
Don’t be tempted by an ‘IVA mortgage’ from specialist lenders
If you still have an IVA on your credit report, it can be easy to get sucked in by specialist lenders promising mortgages for people with current or past IVAs.
It may be easier to get accepted for an IVA mortgage but you will still be required to pay higher interest rates and a higher deposit just as you would with a standard mortgage.
This is because, if a mortgage provider knows you have struggled with repaying debt in the past, they may be less confident in your ability to keep up with your monthly payments and be less keen to green-light your mortgage application.
Where can I get advice on how to get a mortgage with an IVA?
If you have had, or have, an IVA and are wondering how having an IVA on your credit history will affect your chances of getting a mortgage, you must seek free debt advice with professional mortgage advisors able to let you know what your options are.
IVAs are a common debt management plan but there are other debt solutions available, such as Debt Relief Orders, that may be better suited to your current financial situation.
When it comes to getting a mortgage with an IVA, always seek professional advice to find out what your next steps should be.