Mortgage with IVA: Can you get a mortgage when you’re in an IVA?

  • IVA
  • >
  • Mortgage with IVA: Can you get a mortgage when you’re in an IVA?
On this page

When you’re in an IVA, your credit score will be negatively affected and you’ll be unable to borrow large sums of money. This is a small price to pay to be able to write off your unaffordable debt, but it can impact any major life plans you have, such as buying a home.

Having an IVA can make it difficult to get a mortgage as it indicates you’ve struggled with debt in the past. However, your chance of getting approved for a mortgage will improve once your IVA is removed from your credit record.

This article will explore the link between mortgages and IVAs, including how an IVA can affect an existing mortgage and how to get a mortgage after an IVA.

What is an IVA?

IVA stands for Individual Voluntary Arrangement and is a legally binding agreement between you and your creditors (the individuals or companies you owe) to repay your unsecured debts through a series of monthly payments.

Because IVAs are legally binding, they can only be set up and managed by an Insolvency Practitioner (IP) who will act as a third party between you and your creditors and set your monthly repayments at a rate you can comfortably afford.

When you’re in an IVA, all interest and charges will be frozen and your creditors will be instructed to stop pursuing you for the debt. Once you’ve made your final payment, any remaining debt will be written off and you’ll be free to get on with your life.

How long does an IVA last?

Most IVAs last five years – which is the equivalent of 60 monthly payments – but your arrangement can be extended to six years if your repayments fall short of what was originally outlined in your IVA proposal.

This can happen if you request lower monthly payments, have a temporary payment break, or fail to release equity from your home during the final few months of your arrangement.

Once your IVA starts, it will be added to your credit file for six years. This means that, if your IVA lasts the standard five-year term, it will remain on your credit file for another 12 months after your final payment.

As well as your credit file, your IVA will also be added to the Individual Insolvency Register (IIR) until three months after your arrangement ends. This is an online database containing details of all current and recent insolvencies and is usually accessed by lenders, employers, and landlords when they need to verify details of your insolvency.

How will an IVA affect my credit history?

When you have an IVA, it will be visible on your credit file for six years. During this time, your credit rating will be lowered and you’ll struggle to access most forms of credit, including a mortgage.

Because lenders check your credit file when deciding whether to let you borrow money, evidence of an IVA will lower your chances of being approved as it means you’ve struggled with debt in the past. This can make lenders wary of entering into a credit agreement with you in case you default on your payments and they’re not repaid what they’re owed.

Once your IVA has been removed from your credit report, you’ll be free to start rebuilding your credit score and make a fresh start with your finances. This is why most people wait until an IVA has been removed from their credit file before submitting an mortgage application.

However, it is worth noting that all debt solutions affect your credit rating and having an IVA can prove to lenders that you’re actively taking steps towards repaying your debt.

Can I get a mortgage when I’m in an IVA?

During an IVA, you’ll be expected to put the majority of your disposable income (your income minus living costs) towards your arrangement. This means you won’t be able to spend money on luxury items, like holidays, cars, or eating out, and you’ll need permission from your IP if you want to borrow more than £500.

Both standard and specialist IVA mortgage lenders will be hesitant to enter into a credit agreement with you while you’re still insolvent because a reduced income will mean you’ll struggle to afford your monthly mortgage payments.

Furthermore, the main aim of an IVA is to help you repay your debts and a mortgage could put your entire arrangement at risk. Even if you’ve repaid most of your debt and your IVA is close to completion, a standard mortgage company is likely to reject your application.

However, while it can be extremely difficult to get a mortgage with an IVA, a specialist mortgage lender may be able to help you access the best deal for your financial situation. The options available to you will depend on several factors, such as when your IVA started and how much of the debt has been repaid, but most IVA mortgages come with higher interest rates as you’ll be viewed as a high-risk borrower.

What is a specialist mortgage lender?

Most people in IVAs are advised to contact a specialist lenders when shopping around for a mortgage. But what are they and how do they differ from standard or mainstream lenders?

Put simply, a specialist mortgage lender specialises in providing mortgages to borrowers with unique circumstances or poor credit or, in other words, borrowers who would struggle to get a mortgage from a standard lender.

They are much more flexible than standard lenders and tend to view applications on a case-by-case basis. This allows them to offer a wider range of financial products suited to a wider range of needs.

So if you’ve been rejected by a standard mortgage lender or recommended to contact a specialist mortgage lender, don’t worry. They will review your financial situation and discuss all available options with you to ensure you get the best possible mortgage loan for your unique circumstances.

Can I get a mortgage after an IVA?

Whether you can get a mortgage after an IVA usually depends on how soon after your final payment you apply.

Even if you successfully complete your IVA within five years, it will still be visible on your credit file for another 12 months. This can make lenders wary of lending to someone with such recent debt problems and most will recommend waiting until your IVA is removed from your credit record before making another application.

However, you should have no problem applying for a mortgage once your IVA has dropped off your credit file and you’ve had time to boost your credit score. Some lenders will ask if you’ve ever been in an IVA which can influence their final decision as well as the terms offered to you.

Once your IVA has been removed from your credit file, you’re advised to start increasing your credit rating before applying for a mortgage. This will prove to lenders that you’re committed to improving your financial situation and are a responsible borrower.

How will an IVA affect my existing mortgage?

Entering an IVA when you have an existing mortgage can raise some questions about how it will affect your home and current living situation.

However, you can rest assured that your assets will be protected during an IVA and your mortgage payments will be factored into your budget. This means you’ll never be forced to sell your home to repay your debt and can continue living there for the duration of your arrangement.

The only time your mortgage will come into play is during the final year of your IVA when you’re asked to release some of the equity within your home. This is to give your creditors a final chance to recover as much of the debt as possible before your IVA ends and it’s written off.

How can I improve my credit rating after an IVA?

There are various steps you can take to improve your credit rating after an IVA. Here are some of the things you should do after you’ve made your final payment:

Apply for a completion certificate

Once you’ve made your final payment, you should be sent a completion certificate in the post. This is an official document recognising that you’ve successfully completed your IVA and are no longer bound by the terms of your arrangement.

Some people assume that a completion certificate will be automatically issued after they’ve made their final payment, but this isn’t always the case.

The general advice is that, if you haven’t received your completion certificate within eight weeks of making your final payment, you should chase it up with the court. There are a number of reasons why it could be delayed and making enquiries can give you a rough timeline of when you can expect it to arrive.

Register to vote

When you apply for a loan, mortgage, or phone contract, lenders will use the information contained on your credit report to verify who you are and where you live. This is primarily to confirm you are who you say you are and to reduce the risk of identity theft and fraud.

When you register to vote, your electoral details will be added to your credit report and lenders will be able to confirm your name and address. This will boost your credit score and increase your chances of being approved for various credit products, including a mortgage.

Check your credit report for errors

Most people assume that the information contained on their credit report is accurate and up to date. However, while rare, errors can and do happen, and a simple mistake could be unfairly dragging your credit score down.

Even minor errors, such as a misspelled name or address, can lead to discrepancies or inconsistencies and this can be enough for a lender to refuse your application.

Regularly checking your credit report can help you stay on top of your credit score and reduce the length of time a mistake goes unchecked. When you notice something that doesn’t look right, you must contact the relevant credit reference agency as soon as possible and ask them to update your record.

Limit your credit applications

Every time you apply for credit, a lender will perform a ‘hard check’ on your credit file. This is a complete review of your credit history and will harm your credit score.

Making too many credit applications after an IVA can indicate to lenders that you’re in a poor financial situation and this can prevent you from accessing further credit if and when you need it.

However, if you just want to compare interest rates, you can ask your lender to perform a ‘quotation search’ or ‘soft check’ instead. This is a partial review of your credit history and won’t show up on your credit history or harm your credit score.

Stick to a budget

Sticking to a budget can help you allocate money for essential expenses, like housing, utilities, and debt repayment, and non-essential payments, such as entertainment, travel, and eating out.

This can ensure you don’t run out of money before your bills are due and prevent you from ending up in a situation where you’re forced to borrow to cover the cost.

Remember, improving your credit score can be a slow and steady process and your credit history won’t automatically increase overnight. The sooner you make positive changes, the sooner you can take the next step to achieving your ultimate goal of buying a home.

Conclusion

One of the most common concerns among those considering an IVA is whether their arrangement will affect their ability to get a mortgage.

Getting a mortgage during an IVA can be extremely difficult – even with specialist mortgage lenders – but you should have no problem getting a mortgage after you have successfully completed your arrangement and your credit score has improved.

Everyone’s financial situation is unique and whether you can get a mortgage with an IVA depends on your individual circumstances. For further information about the link between mortgages and IVAs, don’t hesitate to reach out for free debt advice tailored to your situation.

Key Takeaways

An IVA is a formal debt solution where you agree to repay your unsecured debt through a series of monthly payments in exchange for your remaining debt being written off
Most IVAs last between five and six years and you'll be bound by strict spending restrictions during this time
Getting a mortgage while you're in an IVA can be extremely difficult, even with a specialist mortgage broker
Although you may be able to get a mortgage immediately after an IVA, your chances of being accepted will improve after your IVA has been removed from your credit file
There are several things you can do to improve your credit score after an IVA, such as registering to vote and sticking to a budget
Maxine McCreadie

Maxine McCreadie

Author/Debt Expert

Maxine McCreadie, prominent personal finance writer featured in Vogue and Yahoo News, delivers practical guidance, simplifying money management and championing financial literacy.

How we reviewed this article:

HISTORY

Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

November 16 2023

Written by
Maxine McCreadie

Edited by
Ben McCormack

Latest Articles

Why choose
UK Debt Expert

Free debt advice

that won’t affect your credit rating

We are rated 5 star by

more than 93%

on Trustpilot*

FCA authorised & regulated

to advise on all UK debt solutions

We’ve helped over

250,000

people with their debt

*reviews for the Creditfix Group

Trusted and ready to take you forward

We’ve helped over a quarter of a million people find a way to deal with their debt 

Reviews for the Creditfix Group