Can You Obtain a Mortgage While under an IVA?

Are you currently under an Individual Voluntary Arrangement (IVA) and wondering if you can still obtain a mortgage? Many people in this situation are concerned about the impact of their IVA on their mortgage applications. In this article, we will explore what an IVA is, how it can affect your ability to get a mortgage, steps to obtain a mortgage while under an IVA, as well as the benefits and potential challenges involved.

What is an IVA?

An IVA is a legally binding agreement between you and your creditors to repay your debts over a fixed period of time, typically five to six years. It is a formal alternative to bankruptcy and allows you to make affordable monthly payments based on your income and expenditure. During the term of the IVA, your creditors are not allowed to take legal action against you, and any remaining debt after completion of the IVA is written off.

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Impact of an IVA on Mortgage Applications

Holding an IVA can have a significant impact on your ability to obtain a mortgage. Lenders generally consider IVAs as a red flag, as it indicates previous financial difficulties. However, it is not impossible to secure a mortgage while under an IVA. With the right approach and proper planning, it is still possible to find lenders who may consider your application.

Steps to Obtain a Mortgage while under an IVA

If you are under an IVA and looking to obtain a mortgage, here are some steps to consider:

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1. Consult with a mortgage advisor who specializes in helping individuals with IVAs. They can assess your situation and provide tailored advice.
2. Review your credit report to ensure it is accurate and up to date. Discrepancies or errors could negatively impact your application.
3. Build a strong deposit. Lenders may be more willing to consider your application if you have a significant deposit, as it reduces their risk.
4. Show evidence of financial stability and responsible budgeting. This can include providing proof of consistent income, regular savings, and meeting your IVA payments on time.
5. Consider using a specialist mortgage lender who may have more flexible lending criteria for individuals with IVAs.

Benefits of Obtaining a Mortgage while under an IVA

While obtaining a mortgage while under an IVA can be challenging, there are several benefits to consider:

• Getting onto the property ladder: Owning a home can provide stability and potentially be a sound long-term investment.
• Improving your credit history: Successfully managing a mortgage while under an IVA can help rebuild your credit history over time.
• Building equity: As you make mortgage payments, you are building equity in your property, which can be beneficial in the future.

Potential Challenges and Risks

While there are benefits to obtaining a mortgage while under an IVA, it is important to be aware of the potential challenges and risks involved:

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• Limited lender options: Not all mortgage lenders will consider applications from individuals with IVAs, which may limit your options.
• Higher interest rates: As a higher risk borrower, you may be offered higher interest rates compared to individuals without an IVA.
• Stricter lending criteria: Lenders may have stricter criteria for individuals with IVAs, including higher deposit requirements.
• IVA restrictions: Your IVA may have restrictions on borrowing, so it is important to review the terms before proceeding with a mortgage application.

Conclusion

Obtaining a mortgage while under an IVA is challenging but not impossible. It requires careful planning, seeking specialized advice, and demonstrating financial stability. While there are benefits to consider, it is important to weigh the potential challenges and risks involved. Each individual's situation is unique, so it is crucial to consult with a mortgage advisor who can provide tailored guidance based on your circumstances.

Frequently Asked Questions

1. Can I apply for a mortgage while under an IVA?

Yes, it is possible to apply for a mortgage while under an IVA. However, it may be more challenging, and you may need to seek specialized advice and consider lenders who are more open to individuals with IVAs.

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2. Will having an IVA affect my credit score?

Yes, having an IVA will have a negative impact on your credit score. It will remain on your credit file for six years from the start of the IVA.

3. How long do I need to wait after completing an IVA to apply for a mortgage?

Most lenders will require a waiting period of at least one to three years after completing an IVA before considering a mortgage application.

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4. Can I include my IVA payments in my mortgage application?

No, you cannot include your IVA payments in your mortgage application. Lenders will assess your affordability based on your income and expenditure, excluding any existing debt repayments.

5. Are there any specific lenders that consider mortgage applications from people with an IVA?

Yes, there are specialist mortgage lenders who consider applications from individuals with IVAs. Working with a mortgage advisor who has access to these lenders can increase your chances of securing a mortgage.

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