Can I Get a Mortgage After an IVA?

Having an Individual Voluntary Arrangement — IVA — does not automatically mean you can never get another mortgage.

It does, however, make the application more complicated.

The available options can depend heavily upon:

• whether the IVA is still active;
• whether it has been completed;
• when it started;
• when it was satisfied;
• how much deposit you have;
• your credit conduct since;
• whether there are other credit problems;
• your income and affordability; and
• the lender's own adverse-credit criteria.

There is no single rule that applies to every mortgage lender.

What Is an IVA?

An IVA is a formal agreement between an individual and their creditors to repay all or part of their debts over an agreed period.

For mortgage underwriting purposes, an IVA represents significant historic credit difficulty.

That means many mainstream lenders may not be prepared to lend while an IVA is active or for a period afterwards.

Other lenders can have different criteria.

The important issue is therefore not simply:

"Have you ever had an IVA?"

It is:

"What is the complete position now?"

Can I Get a Mortgage While My IVA Is Still Active?

This is one of the more difficult scenarios.

An active IVA substantially restricts lender availability.

There may be circumstances in which specialist lending can be considered, but the complete position needs careful examination.

Relevant questions include:

• What is the outstanding IVA balance?
• How long has the arrangement been running?
• Has it been maintained satisfactorily?
• Is the IVA going to continue?
• Is there a proposed full-and-final settlement?
• Is an existing property being sold?
• How much deposit will remain afterwards?
• What other adverse credit exists?
• What mortgage is required?

An active IVA mortgage should therefore not normally begin with a product search.

It begins with understanding what is happening to the IVA itself.

What If I Am About to Settle My IVA?

This can create an interesting mortgage-planning issue.

For example, somebody may:

1. Own a property.
2. Sell that property.
3. Use some of the equity to settle the IVA.
4. Retain the remaining equity as a deposit.
5. Want to purchase another home.

The obvious question is:

"Do I have to sell, rent for a period, wait for the IVA to disappear and only then buy again?"

Not necessarily in every case.

The possibility of an onward purchase depends upon the precise circumstances, the formal IVA settlement arrangements and the criteria of any potential mortgage lender.

It is the transaction as a whole that needs assessing.

Completed IVA Versus Active IVA

A completed or satisfied IVA is generally a different underwriting proposition from one that is still running.

Once satisfied, potential lender assessment may consider:

• How recently it was completed
• When it originally started
• Whether it remains visible on the credit file
• Deposit size
• Loan-to-value
• Other defaults or CCJs
• Credit conduct since completion
• Current unsecured borrowing
• Income
• Affordability

As more time passes and clean credit conduct is demonstrated, potential lender options can change.

That does not mean everybody needs to wait for an arbitrary number of years before asking what is possible.

Does the IVA Have to Disappear From My Credit File?

Not necessarily for every potential lender.

Credit-reference information is important, but mortgage criteria do not all work on the simple basis of:

Visible IVA = no mortgage

and

IVA disappeared = mortgage available

Different lenders can apply different policies based upon the age, status and circumstances of the IVA.

However, an older completed IVA is generally a different risk proposition from a current or recently completed arrangement.

Your Deposit Can Be Important

Loan-to-value is particularly relevant in adverse-credit lending.

An applicant with a larger deposit may potentially have access to a broader range of options than somebody needing a very high loan-to-value mortgage.

For example, two borrowers with similar IVA histories but deposits of:

• 5%, and
• 25%

do not necessarily present the same lending proposition.

A larger deposit does not guarantee approval, but it can materially affect the lenders and products that may be available.

What Else Is on Your Credit File?

An IVA rarely exists in isolation.

There may also be historic:

• Defaults
• Missed payments
• CCJs
• Arrears
• Debt-management arrangements

A lender may therefore look at the entire adverse-credit history rather than simply the IVA.

This is one reason obtaining and reviewing a detailed credit report can be useful before approaching another lender.

Recent Credit Conduct Matters

An historic financial problem and current financial behaviour are separate issues.

An underwriter may look at whether the applicant has:

• Maintained current commitments
• Avoided further defaults
• Kept borrowing manageable
• Maintained bank accounts appropriately
• Built a more stable recent credit history

That does not erase the IVA.

But it helps establish what has happened since.

Income and Affordability Still Apply

Finding a lender prepared to consider the IVA is only the first part.

The lender must still be satisfied about:

• Income
• Affordability
• Employment or self-employment
• Existing commitments
• Deposit
• Property
• Mortgage term

A specialist lender accepting adverse credit does not mean normal affordability requirements disappear.

Will I Pay a Higher Interest Rate?

Potentially.

Applicants with significant or recent adverse credit may have access to fewer lenders and different products than applicants with clean credit histories.

That can mean:

• Higher rates
• Higher fees
• Larger deposit requirements
• Different early repayment charges

However, the appropriate product depends upon the individual circumstances at the time.

The objective should not simply be to obtain any mortgage available.

It should be to identify an appropriate route and understand its cost and implications.

What Should I Do Before Applying?

Before another mortgage application, establish:

1. The IVA start date.
2. Current status.
3. Completion or settlement documentation where applicable.
4. Any remaining balance.
5. Other adverse credit.
6. Current credit commitments.
7. Deposit available.
8. Income.
9. Required mortgage.
10. Intended property purchase.

This allows the case to be researched for a reason rather than submitting speculative applications.