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Are you Worried? Can You Get a Mortgage with an IVA?

Mortgage with an IVA

Being in debt and having a bad credit score are two of the factors that can increase the difficulty of getting a mortgage. Typically, the minimum credit score, required to get IVA, is 620. 

Having an IVA can affect your credit score to quite an extent. So, can you get a mortgage with an IVA? If you apply for a mortgage while the arrangement is in effect, there is a high chance that it’ll get rejected. Moreover, if you already have one, you would have to contribute the money to repay your debt. That is a fundamental aspect of being a part of an Individual Voluntary Arrangement.

Even if you are qualified to get a mortgage, you can only get up to £500. To be able to get a higher amount, you’ll need written approval from your Insolvency Practitioner.

Now, let’s say that you’ve got the approval. This won’t make things better either, because you’ll have a hard time finding a good rate. 

And, the idea of getting a mortgage during IVA isn’t such a good idea. It will only add to the debt you already owe. Thus, knowing more about IVA would help you to get a better understanding of this matter and help you find a solution.

Get to Know More About IVA

An individual voluntary arrangement is approved by the court and regarded as a formal agreement between a debtor and creditors. It allows the debtor to pay back the debts owed to multiple creditors over a period of time. It is quickly gaining popularity as a means of avoiding bankruptcy. This option is available only to those people who have owed a debt to at least two creditors. Another criteria to be fulfilled is that the debt should amount to £10,000 at least.

How does it work?

When you face insolvency, you can opt for an IVA, provided that you fulfill the criteria. Since this is a formal agreement, you are required to appoint an Insolvency Practitioner. A debt repayment plan is made where the amount to be paid in each installment is decided. The arrangement comes into effect when the creditors give consent to the terms.

After that, the IVA practitioner manages all the debt repayment dealings with the creditors. In addition to the installment, you also have to pay a fee to the practitioner for his/her services. This fee depends on the amount of debt, and it is often too expensive. You are required to maintain a budget and adhere to it throughout the arrangement period. Any additional income or savings is contributed to your debt repayment. 

How does it reduce the chances of getting a mortgage?

Having an IVA means that you are in a debt, you have insufficient assets to be able to settle. Can you get a mortgage with an IVA? Now, if you apply for a mortgage, you will have to mention the IVA. And, lenders would see this as a negative point. They will have doubts, whether you’d be able to repay their debt. 

So, most of them would probably back out. Furthermore, the ones who remain will offer you a high-interest rate. Along with that, there wouldn’t be any scope of accepting the offer, because it would push you more into debt. 

Is it necessary to mention IVA on a mortgage application?

When you appeal for a mortgage, the moneylenders may not immediately ask about IVA. But, they will surely ask you about your credit history. After you get an IVA, it will show for about five or six years on your credit history chart. And, even if you have applied for a mortgage, after a fixed period, you must not try to hide it. Can you get a mortgage with an IVA? Yes, but lying to the lenders would be called for unnecessary risk, that’s not worth taking.

What if you apply for a mortgage before IVA?

If you have applied for a mortgage before the IVA, that doesn’t seem to make things any better. You are already struggling to repay the multiple debts that you’re in. It won’t be a  wise decision to get into debt to yet another creditor. Can you get a mortgage with an IVA? Yes, go for it. The best thing to do would be to get the IVA and settle all existing debts. Only after that would it be sensible to apply for the mortgage application. 

What if you’re required to remortgage?

During the end of an IVA period, a debtor is often required to remortgage in order to pay the creditor. You might come across this situation as well. And this is the only time when applying for a mortgage during an IVA would be sensible. You won’t need any approval from the insolvency practitioner in this case. But, you would still have trouble finding a lender who accepts your application. 

What about getting a mortgage after the IVA?

As we have seen, there is a very little chance that you’ll get a mortgage during the agreement period. But, the situation starts improving after you’ve completed the IVA period. The IVA will show in your credit history for about six years. It would also have done considerable damage to your credit score. 

So, you might still face some trouble getting a mortgage. But, it would only get better from this point. Your credit score will improve with time. Eventually, you’d be able to get mortgages again at desirable rates and interests. You would still have to mention your IVA when asked. But, it probably wouldn’t matter much to the lender, if you’re in a good financial condition now. You would find many of them willing to offer you good rates. 

Conclusion…

Getting a mortgage while on an IVA seems to be quite difficult. There are very few lenders who would take the risk of receiving your application. The ones who do will offer high interests. On top of that, borrowing, while being knee-deep in debt, doesn’t seem sensible. So, now you are clear with your doubts — Can you get a mortgage with an IVA? Yes, you can. But, it would be best not to think about getting a mortgage before the IVA period is over. Only after you’re back in good financial condition is it worth applying for a mortgage again.