How long after an IVA can I get a mortgage?

How long after an IVA can I get a mortgage?

Summary: This article discusses the impact an IVA can have on obtaining a mortgage, looking at how long an IVA generally remains on a credit file, and at what point an individual can reasonably expect to be able to apply for a mortgage with no restrictions applied.

One of the key advantages of an Individual Voluntary Arrangement (IVA) over bankruptcy is that existing homeowners would not usually be required to sell their homes. However, if an individual is looking to buy their first home, being in an IVA could affect their ability to get a mortgage.

Getting a mortgage, or remortgaging a property during an IVA

When entering an IVA agreement, one of the conditions laid out by the creditors is that the individual does not get into any further debt. Therefore, by entering a mortgage agreement, it is possible that the IVA will be failed by the creditors, which could lead to bankruptcy. That said, if there is a good reason then the IVA supervisor could review the situation and give permission to the debtor. Indeed, if the debtor already owns a property and there is equity, it is possible that a condition of the IVA is that the property is remortgaged to release some of the equity to repay the creditors (this is usually in the last year of the agreement).

How does being in an IVA affect getting a mortgage?

As the IVA is detailed on the individual's credit record, it could have a significant impact on being able to obtain a mortgage. Lenders will often consider it a higher risk, and assuming they are prepared to lend at all, it will often be at a higher rate and they will probably ask for a bigger deposit. Due to the nature of an IVA, individuals may find the deposit and/or repayments prohibitive. It is also important to bear in mind that the debtor’s ability to repay the agreed monthly amount to the IVA cannot be affected as this could lead to the failure of the IVA. Should the property increase in value during the term of the IVA, the creditors may also insist on a remortgage to release some of the equity to repay the debt.

At what point does obtaining a mortgage become easier after an IVA?

A record of the IVA will remain on an individual's credit file usually for a period of 6 years (so 12 months longer than the average IVA term of 5 years). After this time, it is removed and should no longer have an impact on obtaining future credit. However, if a mortgage application asks if the applicant has ever been in an IVA, it is important to disclose this information as if the lender later finds out, the mortgage agreement could be nullified and the property repossessed.