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Mortgage with IVA

Can I apply for mortgage with IVA?

An IVA (Individual Voluntary Arrangement) is an agreement to pay back your creditors over typically a five-year period. If you have been late or had missed payments, and you are struggling to meet the repayment terms, you can apply for an Individual Voluntary Arrangement to an insolvency practitioner (IP) – an agreement with your creditors to pay all or part of your debts. You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors. With an IVA you put forward an offer of payments on your debts to your creditors. This will be based on what you can afford. If you have an IVA, your payments towards your debts can be made through either a one-off payment, known as a lump sum IVA, or a monthly repayment plan. In general, an IVA can give you more control of your assets than bankruptcy and most importantly allows you to keep your home and existing mortgage in contrast to bankruptcy. As long as you keep to the IVA terms, your creditors will not contact you or increase the debt. When you have made the final payment, any unpaid debt is written off. While there are no special options for people with IVAs, there are specialist mortgage brokers who can organise your application with lenders prepared to take on the higher risk of lending to someone on an IVA (or protected trust deed if you live in Scotland).

Can I apply for a mortgage when in IVA or after an IVA has finished?

It has to be remembered that an IVA – just like bankruptcy – is a form of insolvency. High street lenders are unlikely to consider an application involving an IVA, bankruptcy or repossession for 6 years after the event. Having said that, there are still options for clients who have had significant adverse events. This is an area which is almost exclusively catered for by small, specialist banks and building societies who can look at each case individually. Better options are possible once you have reached the full term of your Iva particularly three years after though some lenders will consider you whilst you are still paying your IVA. In fact, depending on your overall status, once you have been discharged for three years, even a High Street option may be possible when applying for mortgage with IVA.

Individual Voluntary Arrangement will generally last five or six years – the extra year is usually if you’re a homeowner and you’re unable to re-mortgage when asked to. But your IVA could last longer than this if you’ve had a payment break or any other admin issues.

Lenders are also going to look very closely at the bank statement conduct and the financial history since the IVA took place. Ideally all credit needs to have been conducted well since the time of the incident. There are mortgage options available for clients who are still in an IVA or debt management plan, if that has been conducted satisfactorily. A specialist broker will be able to look at your individual situation and advise what lenders would most suit your circumstances.


Why use a specialised broker?

Sub-prime mortgages are mortgages for borrowers that don’t fit standard criteria and need a little more help in finding the right solution. Prior to 2008 ‘bad credit mortgages’ were supplied by specialist lenders and less severe problems were very often catered for by High Street Lenders. Following the credit crunch specialist lenders almost disappeared from the market and High Street Lenders appetite for risk disappeared, so for a number of years applicants with special needs really had no options.

Now though whilst the High Street stays firmly in the camp of credit score lending there are a number of specialist or niche lenders who actively want to lend from clients with failed credit score borrowers with minor problem or ‘near prime’ all the way up to more severe problems such as having defaults, CCJ’s, pay day loans, missed payments, debt management schemes and bankruptcies.

A good specialist brokers can help you find the right, most suitable solution, for you based on your circumstances – if your credit score is damaged they can help find you a lender who is right for you even though you have probably been declined by a high street lender. A good broker will have an in-depth knowledge of the market and they will be able to recommend the most suitable mortgage for you minimising the risk of your application getting rejected.

Stuart Dibley Specialist
Mortgage Adviser

To find out exactly what you're eligible for and at what rates please give me a call on 03456 123835 or fill out a quick enquiry form here.