In this article, we explore the application process for both an active and past IVA, as well as highlighting ways you can improve your chances of being accepted for a mortgage deal in spite of your credit history.
We also list the top-5 mortgage lenders for people with an IVA in their credit history.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a step you can take when your debts have gotten out of control without having to go into bankruptcy.
IVAs works by an insolvency practitioner - a specialist debt expert - working out an agreement with your creditors so that all your debts can be combined into one, single debt. After that, rather than having to juggle the individual debts, you have one monthly payment. The payment plan is extended over 5 or 6 years and, at the end of that period, any remaining debt is written off.
Taking out an IVA can be a positive step in terms of getting to grips with unmanageable debt. However, it will have a detrimental effect on your credit score with the main credit reference agencies, which will make it more difficult to get a mortgage or other forms of borrowing.
It is worth noting that an IVA will be removed from your file after 6 years have passed from when the agreement is made, which will make it much easier to borrow in the future. The impact of the IVA will also reduce over the course of the 6 years too.
Can I get a mortgage with an IVA?
The short answer is that, while theoretically you may be able to find a specialist lender who will consider giving you a mortgage when you have an IVA, it won't be easy. There is, however, a big difference between trying to get a mortgage when you are in the middle of an active IVA agreement, and when the IVA has come to an end.
Getting a mortgage with an active IVA
Your first port of call if you want to take out a mortgage or remortgage when you have an active IVA is your insolvency practitioner. They have control of your financial arrangements during that time, including any new credit agreements over £500. If they believe you can afford it and if you have kept up to date with your repayment schedule for your IVA, they may allow you to apply for a mortgage.
In this situation, you will need to:
- Find lenders who accept active IVAs. As they are few and far between, it is worth using a good independent mortgage broker, such as Habito*, which will be able to guide you through your options as well as provide you with access to intermediary-only options.
- Ensure you have a good level of deposit available. To counterbalance the perceived extra risk of lending to someone with an IVA, lenders will typically expect a higher level of deposit, which could be up to 25% of the property's value.
- Accept you will have to pay a significantly higher APR than for a standard mortgage. Indeed, if you have the option to wait, your mortgage will be considerably cheaper after 3 years of an active IVA or, even better still, after the IVA has come to an end.
Getting a mortgage when you have had an IVA in the past
As the IVA will automatically come off your credit file after 6 years, your chances of getting approved for a mortgage after that time will improve significantly. However, you need to bear in mind that mortgage lenders will often ask you about your longer-term credit history, and you may be obliged to report things like CCJs, IVAs, or bankruptcy.
It is also likely your credit score will remain low for some time after the IVA has been satisfied, which means you are likely to still need to use a specialist lender and could benefit from using a whole-of-market mortgage broker to help you find the best deal for your circumstances.
How can I improve my chances of getting a mortgage after having an IVA?
As we have discussed, while the effect the IVA has on your credit file will reduce over time and it will be removed altogether after 6 years, there is still a high probability that your credit score will have been impacted by both the IVA and the mismanaged borrowing leading up to it.
With this in mind, it pays to heed the following steps to increase your chances of being accepted for a mortgage:
- Try to improve your credit score with the main credit reference agencies. For example, minimise the number of credit cards and other credit products you apply for and make sure you keep on top of the repayments for any credit agreements you have taken out since satisfying your IVA. You could also use a service such as LOQBOX* or Experian Boost, with the former designed specifically to improve your credit record. For more advice, read our article "How to improve your credit score quickly".
- Wait for time to elapse for your credit score to naturally start improving. It can take up to 3 months from satisfying your IVA for it to be marked as discharged on your record, simply due to the administrative process.
- Try to maintain stability in your circumstances where possible. Staying in the same job or living at the same address, for example, will have a positive impact on how your application is viewed.
- If you can delay your house purchase, it could mean you can access more competitive deals, as you distance yourself from your poor credit history. It also allows you more time to get together a larger deposit, which will also make it more likely you'll be accepted for a better mortgage deal.
What is a "windfall clause" and will it affect my mortgage application?
A so-called "windfall clause" is when it is written into your agreement for your IVA that if you come into money through, for example, a lottery win, inheritance, or redundancy payout, that money will be used to pay off your creditors - either in part or in full.
The potential impact for a mortgage application is in relation to the deposit that's required to secure the deal. Your creditors and insolvency practitioner may question how you have accumulated the deposit and whether you received a windfall payment you didn't declare. If this is the case, there could be legal ramifications as you may have broken the law.
Which are the best mortgage lenders if I have had an IVA?
While there are a limited number of specialist mortgage lenders that will accept IVAs, below we have highlighted the 5 best lenders who do cater to this section of the market. We have based our assessment on their product range, their eligibility criteria for IVAs and other bad-credit events, as well as the maximum LTV they offer.
| Mortgage Lender | Eligibility Criteria | Maximum LTV |
| Buckinghamshire Building Society | Standard mortgage - IVA discharged for 5 years.
Non-standard mortgage - discharged for 4 years. Impaired credit mortgage - by application. |
80% (Prime).
75% (Non-standard credit).
60% (Impaired credit).
|
| Darlington Building Society | Non-standard - satisfied over 5 years ago
Credit repair - Satisfied over 3 years ago Extra support - Any time in the last 3 years |
Up to 80% (Non-standard)
Up to 70% Credit Repair Up to 65% (Extra Support) |
| Skipton Building Society | Discharged for at least 3 years, by referral. | 85% |
| MBS Lending | Near Prime mortgage - satisfied for at least 12 months.
Credit Assist mortgage - repaid on or before completion. Credit Recovery mortgage - satisfied or conducted satisfactorily. |
70% |
| Vida Homeloans | Discharged at least 6 years ago. | 85% |
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