In This Article
What is an IVA?
An IVA stands for Individual Voluntary Arrangement. They are seen as an alternative to bankruptcy, slightly less serious than full bankruptcy but still on the serious end of adverse credit.
It is a formal agreement to pay back your creditors over some time. The agreement is confirmed in court and to be stuck to by the person entering into it and the creditors.
A qualified person must set up the IVA and the role they have is ‘insolvency practitioner’. They will come from an accounting or law background. They charge fees for arranging the IVA and these are often calculated based on the amount that you pay back. It’s the insolvency practitioner that continues to deal with the creditors.
When a person enters into an IVA, they have a meeting with the insolvency practitioner to agree on the repayment plan. This may be in the format of a lump sum, monthly payments or both.
The amounts to be paid will need to be realistic to make sure the person has the chance of sticking to the plan. They will often last between 5-6 years, but they can vary. Payments are made to the insolvency practitioner which will go towards paying back the creditors and the fees for the insolvency practitioner for the plan.
If you make the agreed payments for the agreed amount of time, after this period, the plan ends. The terms of the plan are all advised to you when entering into one. Find out more information about IVAs from Citizens Advice.
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Does an IVA affect your mortgage?
Having an IVA can affect you getting a mortgage even when out of the IVA. To borrow when you are in one, you need to get permission from the insolvency practitioner as you are still repaying all of the previous creditors so taking new credit needs to be granted.
The permission of the insolvency practitioner is not the only factor to consider, also lenders themselves will rarely have an appetite to lend to a person that is in an IVA plan until the plan has ended and they have been fully discharged.
Some lenders will consider discharged applicants and for the ones that do, they have different criteria on the amount of time that needs to have passed before they will consider the application, for example, 3 years.
They may also have different criteria on how credit needs to have been handled in recent years too.
If you have had an IVA and are now looking for a mortgage, it would be wise to speak with a qualified mortgage adviser that has experience dealing with adverse credit to find out what your mortgage options are. An experienced adviser may be able to give you an idea of when you may qualify for a mortgage again, if not at the moment.
How long will an IVA stay on my file for lenders to see?
An IVA remains on a credit file for six years before it then drops off. The details of the IVA are also held on an insolvency register which then comes off after 3 months.
In theory, if an IVA is entered into, and lasts for five years, one year after it has finished it should no longer be showing on a credit file. It will be the job of a mortgage applicant to disclose the IVA to a lender when applying for a mortgage.
To view your credit file for sight of IVAs or any other adverse data, you can use websites such as Experian, Equifax or Check My File.
If I had an IVA, would I use a special mortgage broker?
A specialist adverse credit mortgage broker may not be required but it would certainly be recommended to look for a mortgage adviser that has experience in dealing with adverse credit, mainly IVAs so they know which lenders are the best ones to approach.
Most mortgage advisers will be able to give a free consultation to get a full understanding of the adverse credit that took place, why it happened, and when it happened and then recommend lenders accordingly.
They would also need to understand the deposit available, income for the applicants, commitments such as loan and card repayments, PCP, Student Loans, dependents and more.
If I had an IVA, would I use a specialist mortgage lender?
As a mortgage applicant has an obligation to let the mortgage lender know about the IVA (and it may still be showing on the credit file), chances are that a Specialist Mortgage Lender will be required if the IVA was fairly recent. If this is the case, this would usually mean a higher rate of interest.
This may not always be the case though as some prime lenders will consider applicants that have had an IVA after a certain amount of time has passed. This period will vary depending on the lender so best to take professional advice to find this out.
A mortgage adviser will be able to look at the full situation to assess whether a specialist adverse lender would be needed or whether a more prime lender may consider the mortgage application.
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Conclusion
To answer the question – Does An Iva Affect Your Mortgage? The answer is it may be possible for you to get a mortgage but will depend on a variety of other things which an adviser would be able to go through with you.
Not all lenders would accept the application, but many specialise in applicants that have had adverse credit.
It would be wise to speak with a qualified mortgage broker who has experience in arranging mortgages for people that have had an IVA.
If you would like I NEED ADVICE to match you with a mortgage adviser that can call you to advise you of your mortgage options if you have had an IVA, please complete the contact form.
They are experienced, which can boost your chances of being approved.
