Our guide to mortgages with settled or unsettled IVA

At some point in their lives, many people experience problems in dealing with the day to day management of their debts – especially if you have been forced to take time off work through ill health or unemployment, for example.

Fortunately, advice on resolving issues surrounding debt and the various solutions available are provided by several sources – including the charity organisation the national debt advice service Step Change.

So, it has become easier to find solutions to your debt management issues. But the fact that you experienced temporary problems and had recourse to one kind or another of debt remedy:

  • appears on your credit record;
  • adversely affects your credit rating; and
  • that, in turn, is likely to make it more difficult to secure a mortgage.

But more difficult does not mean that it is impossible.

So, let’s take a closer look at some of the issues you might encounter if you resolved your debt problems with a particular solution and see how you might fare in getting a mortgage with a settled or unsettled Individual Voluntary Arrangement (IVA).

Post Contents

What is an IVA?

Can I get a mortgage with settled or unsettled IVA’s?

What mortgage deposit will I need if I’ve had an IVA?

How can I improve my chances of getting accepted for a mortgage when I have an IVA?

What types of mortgage can I get with a settled IVA?

Next steps getting a mortgage with an IVA

What is an IVA?

If you are unable to pay your debts as they fall due, you may be described as insolvent.

To satisfy your creditors, you might agree a Debt Management Plan, in which you agree to repay smaller amounts each month for as long as it takes to clear your debts. Debt Management Plans (DMPs) are regulated by the Financial Conduct Authority.

An alternative form of agreement with your creditors is an Individual Voluntary Arrangement (IVA). With an IVA your debts are frozen at the moment the agreement is made, you make repayments over an agreed period, and any outstanding balance at the end of that period is written off, explains the Money Advice Service.

IVAs are not regulated by the FCA – and this may be one of the reasons for a recent surge in their use, suggests the website IVA Information. The website reveals that a record 71,000 people began an IVA during 2018 – a 20% increase on the previous year’s total.

Can I get a mortgage with settled or unsettled IVA’s?

Despite the usefulness of an IVA in resolving your debt problems – and their evident popularity – the record of such an arrangement remains on your credit file for a minimum of six years. Whether you have already settled an IVA (it has reached its agreed term) or remains unsettled, your credit rating is adversely affected.

Any mortgage lender is obliged to scrutinise your credit rating to assess the affordability of such an advance and to reach a view on your capacity to manage your debts and to make repayments when they fall due.

If it is still running its course and you have an unsettled IVA, it not only appears on your credit record but also remains to be seen whether you are going to abide by its terms and meet your obligations to repay your debts. In those circumstances, no mortgage lender is likely to take the risk in advancing yet further credit. Unsettled IVA mortgages are to all intents and purposes out of the question.

When you have completed an IVA, it still remains a blot on your credit record. But the fact you have complied with its terms and settled the arrangement shows you have managed the obligation successfully. Mortgages with an IVA on your record may still be difficult to arrange, but there are some lenders prepared to entertain the possibility of granting you the loan.

What mortgage deposit will I need if I’ve had an IVA?

The record of your settled IVA is erased from your credit file after six years. Until that time, you are still likely to encounter difficulties in securing a mortgage – and that, in turn, may affect the size of the deposit you need.

Whereas someone with a near-perfect credit history may secure a mortgage with a loan to value (LTV) ratio as high as 95% to 90%, if you have a settled IVA on your record, any lender is likely to advance a mortgage of only 85% or 75%

Because you represent a higher risk, any lender wants to avoid a situation in which the value of the home you buy is less than the amount of the mortgage – so-called negative equity.

How can I improve my chances of getting accepted for a mortgage when I have an IVA?

If your credit history is already compromised by the existence of an IVA, you might improve your chances of getting accepted for a mortgage if you do all you can to enhance that credit history:

  • get a copy of your credit file from any of the three main credit reference agencies – Experian, Equifax, or TransUnion (formerly CallCredit);
  • check all your personal information, including your current address, is accurate and up to date;
  • make sure your name is on the electoral roll – it is used to confirm your identity;
  • ensure that the details of your credit history are accurate and up to date; and
  • consider adding a personal note to explain any particular instances of financial difficulty (periods of illness or unemployment, for example),

What types of mortgage can I get with a settled IVA?

If you have a settled IVA in your credit records, you are likely to find it more difficult to arrange a mortgage.

But some lenders are still prepared to consider your application favourably. Those that do so are likely to be able to offer residential homeowner mortgages, buy to let mortgages and remortgages.

Next steps getting a mortgage with an IVA

An IVA may present a convenient and readily accessible way out of insolvency.

If you have had to arrange one, however, that very fact adversely affects your credit rating – and you may effectively rule out the possibility of securing a mortgage if your IVA remains unsettled.

Once the agreement is settled, it may still prove difficult to arrange mortgages with an IVA on your record. But here at Needing Advice, we have close working relationships with several mortgage providers who are prepared to consider applications from individuals with a bad credit record – including those who have settled an IVA within the past six years.

Damian Youell

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FAQs –

Can I get a mortgage with IVA?

Yes, provided you have a good track record of repaying your debt and meeting your obligations under the agreement. If you have an IVA on your credit file, you should expect to pay more for a mortgage than someone without one. You will probably find it harder to obtain a mortgage because of this, but there are ways around this problem.

You could try to persuade a mortgage broker to help a bank or building society. Banks and building societies usually offer loans at lower rates than brokers. However, they tend to require larger deposits and higher LTV ratios.

If you are interested in getting a mortgage with IVA, you can contact our team of expert mortgage brokers before starting your mortgage application.

Can mortgage lenders see old debts no longer on my credit record?

No. They cannot see what has happened to your debt. All they know is that you have paid off part of it.

Will my creditors be able to see my IVA?

No. Your IVA is confidential and not available to anyone except those involved in administering the arrangement.

Is my IVA recorded on my credit report?

Your IVA is removed from your credit file after 6 years. This means that it will not appear on your credit report unless you apply for another credit card or other form of credit within that period.

Can I get a mortgage with a poor credit score?

Yes, you can get a mortgage with a poor credit score, provided you meet certain criteria.

The best way to improve your chances of being accepted for a mortgage is to make sure that your credit history is clean and up to date.

The following factors may affect whether you are accepted for a mortgage:

your age;

the type of property you want to buy;

how much money you need to borrow;

whether you have had previous bad experiences with mortgages;

any outstanding debts such as car finance, overdrafts, or unsecured loans;

if you have adverse credit score;

if you have been bankrupted or made insolvent; and

if you have ever defaulted on any loan repayments.

If you think you might be turned down for a mortgage, you can ask us about alternative options. We’ll discuss these with you and give you some advice in the mortgage application process.

About The Author

mortgage broker damian youell

See some of Damian’s client reviews below

Damian is an experienced mortgage broker, founder of NeedingAdvice.co.uk Ltd and company director. With over a decade working as a mortgage broker he has a strong understanding of hard to place mortgage cases. With hundreds of 5 star client reviews. hundreds of repeat clients his work speaks for himself.

He started NeedingAdvice.co.uk as a one man band with the philosophy of putting clients needs ahead of his own. This ethos of offering excellent customer service has helped the business grow over the years. He gets satisfaction on getting cases pushed through to offer stage where other mortgage broker and companies have failed.

Throughout his time as an adviser he has carved out a niche area of advice helping clients with their business protection requirements too. Having helped hundreds of client with Relevant Life Policies, Shareholder Protection Insurance, Keyperson Policies and other important protection requirements of large to small businesses.

At home he is a family man and likes to spend his time with his four children and wife Lisa. He enjoys going on holidays spending time with friends and going for walks.