Getting a mortgage after an IVA may sound daunting, but it’s far from impossible. You’ve worked hard to resolve your debts, and now it’s time to turn your focus toward homeownership. The good news? Many UK homebuyers in similar situations have successfully secured a mortgage after an IVA—and so can you.
In this guide, you’ll discover how to deal with the post-IVA mortgage process with confidence. We’ll cover everything from understanding how your credit history impacts your chances, to finding specialist lenders who can help. Whether you’re a first-time buyer or looking to remortgage, the path to securing your dream home doesn’t have to be out of reach.
It’s all about taking the right steps, making smart decisions, and knowing where to find the best mortgage options.
So, let’s explore how you can unlock the door to homeownership, even after an IVA.
What is an IVA?
An Individual Voluntary Agreement (IVA) is a legally binding agreement between you and your creditors, set up to help manage and clear debt.
It’s designed to give you some breathing space, allowing you to repay your debts at a more affordable rate. An IVA typically lasts five to six years and is arranged by an insolvency practitioner (IP). They will work with you to propose a repayment plan based on your financial situation. This plan can include monthly payments, a lump sum, or a mix of both.
One of the key benefits of an IVA is that it freezes your debt and stops creditors from chasing you for payments or adding more interest. Once the IVA term is complete, any remaining debt is usually written off.
However, entering an IVA is a serious commitment, and failure to meet its terms can result in bankruptcy.
How Does an IVA Impact Your Credit History?
Entering an IVA significantly affects your credit report, reducing your ability to borrow. Here’s how it impacts your credit file:
- Credit report entry: An IVA remains on your credit file for six years from the start date, even if you finish the repayments earlier
. - Credit score reduction: Your credit rating will drop due to the IVA, as it signals to lenders that you’ve struggled with debt
. - Borrowing restrictions: During the IVA, you’re limited in how much you can borrow without your IP’s approval. Even after the IVA ends, getting credit can be challenging
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With careful management of your finances during and after an IVA, you can begin to rebuild your credit and work towards geeting a mortgage in the future.
How Will Your IVA Affect Your Chances of Getting a Mortgage?
Similar to CCJ’s, an IVA significantly impacts your ability to secure a mortgage, especially during the first few years. Lenders view an IVA as a sign that you’ve struggled with debt management in the past, making you a higher risk.
As a result, most mainstream lenders and high street banks may decline your mortgage application while the IVA is still active, or even for several years after it’s been settled.
However, some specialist lenders cater to individuals with a history of an IVA, though they often require higher deposits and charge higher interest rates to mitigate the risk.
Factors that will affect your chances:
- Time since the IVA: The longer it has been since your IVA was settled, the better your chances. Lenders prefer to see several years of financial stability before approving a mortgage.
- Credit history: Your credit file will still reflect the IVA for six years from the date it was registered. Even after it’s cleared, some lenders may still ask if you’ve ever had an IVA and use that information when assessing your mortgage application.
- Deposit size: Having a larger deposit, ideally between 10% and 25%, can improve your chances of approval. This reduces the lender’s risk and shows financial responsibility
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Can You Secure a Mortgage After Your IVA is Settled?
Yes, you can get a mortgage after your IVA is settled, but it will take time and patience. While the IVA stays on your credit file for six years, there are options to get a mortgage even before it drops off.
However, the process is more challenging, and you will likely need to work with a specialist mortgage lender who deals with adverse credit histories.
Here’s what to expect:
- Within three years of settlement: Your chances are still limited, and you’ll likely need to work with specialist lenders who will charge higher rates. You may also need to save a larger deposit
. - After three years: More lenders may be willing to consider your application, though they will still view you as higher risk, and you’ll likely face stricter conditions. At this stage, having a mortgage broker with experience in IVA cases can help connect you with suitable lenders
. - After six years: Once six years have passed and your IVA has been removed from your credit file, you’ll have more options, including mainstream lenders, with better interest rates and terms
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To improve your chances, focus on rebuilding your credit score, reducing debt, and maintaining regular payments on any remaining liabilities. This will show lenders that you have regained control over your finances. Working with a specialist mortgage advisor can also help in dealing with challenges of applying for a mortgage after an IVA.
What Are the Steps to Getting a Mortgage After an IVA?
Securing a mortgage after an IVA can seem challenging, but with proper preparation and strategic planning, it’s entirely achievable. You can follow these steps to improve your chances:
1. Check Your Credit File
Start by reviewing your credit file with the main credit reference agencies. This will allow you to identify any inaccuracies and ensure that your IVA is recorded correctly. If your IVA is already settled, it should be marked as “completed.” A settled IVA reassures lenders that you have fulfilled your obligations and are more likely to manage future repayments responsibly.
2. Rebuild Your Credit Score
Having an IVA can significantly impact your credit score. Rebuilding your score is important to improve your chances of getting a mortgage. You can do this by consistently making payments on time, keeping your credit utilisation low (under 30%), and avoiding any new defaults. Using a credit-building credit card and managing it responsibly can also demonstrate that you’re capable of handling credit effectively.
3. Save for a Larger Deposit
Given your financial history with an IVA, many lenders will require a larger deposit. The minimum deposit typically required is around 10%, but having a deposit closer to 20%-25% can significantly improve your chances of approval and even lower the interest rates on your mortgage. This shows lenders that you’re serious about managing your finances and are less risky despite past challenges.
4. Work with a Specialist Mortgage Broker
Consider working with a specialist mortgage broker who has experience dealing with applicants who have an IVA. They can help you find specialist iva mortgage lenders who are more likely to approve your application, as mainstream or a high street lender may reject you outright due to your past credit report. Brokers can also help you find lenders that offer more competitive interest rates for individuals with past IVAs.
5. Get Mortgage Affordability Checks
Before applying for a mortgage, it’s important to get an affordability check. This will help you understand how much you’re likely to borrow based on your current financial situation. Lenders will conduct their affordability checks, so it’s a good idea to reduce your monthly outgoings on other debts to improve your application.
How Much Deposit Will You Need After Having an IVA?
When applying for a mortgage after an IVA, the size of your deposit becomes a critical factor. It not only influences your chances of approval but also determines the interest rates and mortgage products available to you. Here’s what you should know:
Minimum Deposit Requirement
For individuals with a history of bad credit, such as an IVA, most lenders will require a minimum deposit of 10% of the property’s value. This is because a larger deposit lowers the loan-to-value (LTV) ratio, reducing the lender’s risk.
However, the exact percentage can vary based on the lender’s risk appetite and your financial history. If you have a low credit score or poor credit, you may be required to put down a larger deposit to compensate for the increased risk
- Poor credit score: An IVA leaves a mark on your credit file, reflecting a history of poor credit management. As a result, lenders see you as a higher-risk borrower, often leading to a requirement for higher deposits.
- Active IVA: While it’s possible to get a mortgage with an active IVA, very few lenders will offer such a product, and even then, a higher deposit is a must
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Optimal Deposit Size
If you want to improve your chances of getting a mortgage with better terms, aim for a 20%–25% deposit. This reduces the LTV ratio, making your mortgage less risky for the lender. With a larger deposit, you’ll likely access lower interest rates, which will save you money in the long run. A 20%-25% deposit can also open the door to more affordable mortgage options
- Interest rates: The bigger your deposit, the lower the interest rate. A smaller loan relative to the property value gives lenders more confidence, which can lead to better rates on your mortgage.
- Specialist brokers: To get the best deal, consider working with a specialist mortgage broker or expert mortgage broker who has experience with IVA clients. They can help you find the right lenders and deal with issues.
Gifted Deposits
A gifted deposit from family can help boost your chances of securing a mortgage. However, if the windfall clause is still in effect, any gifted money may need to go towards the IVA instead of being used for a deposit. Ensure the IVA is settled to avoid complications. Many lenders will still ask about the source of your deposit, so be upfront about it during the application process
Could a ‘Windfall Clause’ Prevent You from Getting a Mortgage After an IVA?
A windfall clause is a specific provision within your individual voluntary arrangement that ensures any unexpected or additional money you receive during the IVA is used to pay off your debts. This could include inheritances, lottery winnings, bonuses, or even large cash gifts. Essentially, if you come into extra funds, those funds may automatically be directed towards settling what you still owe under the terms of the IVA.
The windfall clause serves as a way to ensure creditors receive as much of the owed money as possible, rather than allowing you to keep or save the funds for other purposes, such as a mortgage deposit. This can be a significant barrier if you’re trying to save for a larger deposit while still within the IVA period, as any sudden inflow of money may be claimed by your creditors.
How Does the Windfall Clause Affect Getting a Mortgage?
While the windfall clause is active, it can prevent you from accumulating enough money for a mortgage deposit. You might find yourself saving diligently only to have a lump sum, like a bonus or inheritance, redirected to pay off your IVA. If you’re planning to get a mortgage after an IVA, it’s essential that the IVA is completely settled first. This way, you won’t run into complications with a windfall clause that could reduce your savings for a deposit.
Additionally, adverse mortgage lenders (specialist lenders who offer home loan to people with poor credit history) may still consider your application during an IVA, but be prepared for higher loan-to-value ratios, higher interest rates, and stricter lending criteria. In most cases, it’s best to wait until the IVA is fully settled and you’ve received your completion certificate to avoid issues related to the windfall clause
Is it Possible to Remortgage While in an IVA?
Remortgaging during an individual voluntary arrangement is possible but difficult due to the impact it has on your credit rating. Most lenders hesitate to approve applications from individuals in an active IVA because it signals past financial difficulties. However, some specialist mortgage lenders may still consider your case, though the terms will be less favourable.
The Role of the Insolvency Practitioner
Before remortgaging, you must get approval from your insolvency practitioner (IP). They will ensure that any funds raised from the remortgage contribute towards paying off your debts as part of the IVA agreement. This means that if remortgaging helps you settle your IVA earlier, it may be approved. The IP plays a significant role in balancing your interests and those of your creditors.
Challenges with Remortgaging in an IVA
Remortgaging is challenging because:
- Your credit record clearly shows the IVA, which negatively affects your credit rating, signalling that you’ve had trouble managing debt.
- Most mainstream lenders will not offer a remortgage due to this high risk.
- If you do find a lender, they may require you to have a significant amount of equity in your property to offset their risk.
Specialist Lenders
While most high street lenders are hesitant, there are specialist lenders who offer mortgages to individuals with poor credit histories or active IVAs. However, these remortgages often come with higher interest rates and fees. Additionally, you may need a specialist mortgage broker to help you find the right lender who will accept your application based on your unique situation.
Alternatives to Remortgaging
If remortgaging during the IVA is too difficult or offers poor terms, consider waiting until your IVA is settled. Once settled, your credit history starts to recover, and more favourable terms might become available. After six years, the IVA will be removed from your credit record, making it easier to find better mortgage deals
How a Joint Mortgage Can Boost Your Chances After an IVA
Applying for a joint mortgage when one applicant has a better credit history than the other can significantly improve the chances of securing a mortgage, even if one person has an individual voluntary arrangement on their record. Here’s how it works and the factors you need to consider.
1. Combining Credit Profiles
When you apply for a joint mortgage, the lender assesses both applicants’ credit reports and financial history. If the second applicant has a stronger credit rating and no history of bad credit, their positive record can help offset the negative impact of the IVA on the first applicant’s credit. This may make the lender more likely to approve the mortgage, as the overall risk is reduced.
2. Income and Affordability Checks
A joint mortgage also means combining incomes for the lender’s affordability checks. A higher combined income can lead to a higher mortgage offer and improve the chances of securing a better deal. However, even with higher income, the lender will scrutinize the applicant with the IVA, especially if the IVA is recent or still active.
3. Specialist Lenders and Higher Deposits
If one applicant has a poor credit history due to the IVA, mainstream lenders may still be cautious. In this case, working with a specialist lender who is more flexible with IVA mortgages can increase your chances. These lenders are more willing to approve applications with adverse credit, but they often require a larger deposit, usually around 15% to 25%, to mitigate their risk.
4. Impact of the IVA on Mortgage Terms
Even with a joint mortgage, the applicant with an IVA will affect the mortgage terms. Lenders will likely offer higher interest rate to compensate for the increased risk. You may also face stricter conditions, such as higher mortgage charges or a longer repayment period. However, the stronger applicant’s credit can still result in more favourable terms compared to applying solo with an IVA.
5. Joint Responsibility
It’s crucial to remember that in a joint mortgage, both applicants are equally responsible for the repayments. If either party defaults, it impacts both credit histories. If you’re the applicant with the IVA, maintaining financial discipline and contributing equally to the mortgage is essential to avoid further damage to both your and your partner’s credit scores.
6. What Happens After the IVA is Settled
Once the IVA is fully settled and marked as completed on your credit record, your chances of securing a joint mortgage improve further. Although the IVA will still remain on your credit file for up to six years, lenders will see that you’ve taken steps to resolve your debts.
Over time, as your credit rating improves, you may even be able to remortgage for better terms later down the line.
Final Thoughts
Achieving homeownership after an individual voluntary arrangement is entirely within your reach with the right steps. It’s not just about overcoming past financial hurdles; it’s about smart planning and leveraging your strengths.
Patience plays a key role here. As your credit history improves over time, so do your chances of obtaining better mortgage terms. With the right guidance from mortgage brokers, you can find a path that suits your financial reality.
Ultimately, the journey to securing a mortgage after an IVA is about making informed choices and staying focused on long-term financial health. With determination, the dream of owning a home can become a reality.