The Complete Guide to Individual Voluntary Arrangement(IVA)Mortgages

Getting a mortgage is always a big step in life and we have to research well before taking this decision. Mortgage approval is a complicated process and if you have an active IVA, then accessing a new mortgage is even more challenging. In this article, we’ll explore the possibilities of getting a mortgage application approved with IVA.

What is an IVA?

An Individual Voluntary Arrangement(IVA) is an agreement between a debtor and their creditors that allows the debtor to pay off some or all of their debts over time, rather than in one lump sum. An IVA is known as a type of payment plan for someone with high debt. This type of arrangement allows an individual to repay their creditors at a rate they can afford. The IVA will be set up by your insolvency practitioner (IP).

The main benefit of an IVA is that it gives you breathing space to get back on track financially. It also helps you reduce your monthly payments and give you a chance to save money. However, there are certain conditions which need to be met before you can apply for an IVA.

Mortgage with an IVA

“IVA mortgage” is a term referred to a mortgage application in which IVA shows on the credit report of the borrower. If you are interested in buying a property and an IVA is showing on your credit file, then you should know that you may not be able to get your mortgage approved by some high street lenders. However, there are some mortgage lenders who will approve your mortgage application.

Buying a home is always a dream for many, but when you have a lot of financial commitments, it becomes difficult to manage them all. Mortgage lenders will look into your ability to meet your monthly repayment obligations and ensure that you don’t default on any loan. They will also check whether you have enough funds available to cover the down payment and other costs associated with buying a house.

If you want to buy a property with an IVA, then you must first find out what kind of mortgage lender will accept your application. You can do this by contacting a specialist mortgage broker who can help you with the most suitable mortgage deal.

Impact of IVA on Mortgage Application

IVA’s carry many implications for buyers. For example, if you have an IVA on your credit file, it could affect your chances of getting a mortgage from a bank or building society. Here in this section, we will explain the different impacts of IVA on mortgage applications.

There are several factors that you need to consider while buying a new property with IVA on your credit file.

Disposable Income: 

The primary impact of IVA on your credit file will be the amount of disposable income you have available to repay your loan. Your disposable income is calculated after deducting all your expenses, including rent, utilities, food, etc. In order to qualify for a mortgage, you will need to prove that you have sufficient disposable income to service the loan. Therefore, if you have an ongoing IVA, then you’ll need to provide proof of your current income.

Credit Score: 

Another important factor that you need to take care of while applying for a mortgage is your credit score. A higher credit score means better chances of getting a reasonable interest rate and lower monthly instalments. So, if you have an active IVA, then you might not be eligible for a particular loan because of your poor credit history.

Although if you have an individual voluntary arrangement, it will show that you are taking responsibility for your debt and rebuilding your credit score but in reality, it will also present your credit history to mortgage lenders, who might consider it as a negative mark against you. The best thing is to contact a specialist broker before starting your mortgage application process.

Interest Rate: 

You will also need to pay attention to the interest rates offered by banks and building societies. The interest rates offered by these institutions depend upon how much money they are willing to lend to you. If you have an IVA, then your credit score will play a major role in determining your interest rate. It is possible that you might get a higher interest rate than someone else with a similar credit score.

In addition, some lenders may ask you to submit additional documents, such as tax returns, payslips, utility bills, etc., to verify your income and expenditure. This will increase your processing time and cost, which will ultimately result in increased interest rates.

So, if you’re planning to apply for a mortgage, make sure you have enough cash flow to cover your monthly payments. Also, check whether you have any outstanding debts and try to reduce them as soon as possible. If you’re looking forward to buying a house with an IVA, you should always consult a professional mortgage advisor who has experience in dealing with IVAs. They will guide you through the entire process and ensure that you don’t face any problems during the application process.

Repayment Period: 

Another primary concern while buying a property with IVA is the length of the repayment period. Most banks and building societies prefer borrowers who can repay their loans within a fixed period of time. If you cannot repay your loan within the stipulated time frame, then you might end up paying more than what you originally borrowed.

Therefore, if you want to buy a home with an IVA, then you must plan ahead and decide when you would like to settle your loan. It would help if you also kept yourself updated about the different types of mortgages available in the market so that you can choose one that suits your needs. Feel free to contact a market broker for your help.

There are some other factors that you might need to consider while getting a mortgage with IVA. We recommend you seek expert advice from a financial adviser or an expert mortgage adviser.

How can I apply for a mortgage with an IVA?

If you are interested in buying a new property during your IVA, you need to follow a process before starting your application with a lender.

The primary step is to get the permission of an Insolvency Practitioner.  An insolvency practitioner is a person who is responsible and licenced to act regarding an insolvent individual, partnership or company.

Your appointed IP will understand your financial circumstances and update you about your current disposable income and debt repayments.

Once your insolvency practitioner has approved you, you can start applying for a mortgage. However, there are certain things that you need to be aware of before doing so.

The second step is to research different interest rates and deposits from mortgage lenders. If you have a current IVA, the mortgage lenders may ask you for a higher deposit amount and interest rates. It is always better to contact a  specialist broker who can help you with suitable mortgage deals.

Lastly, an independent mortgage broker will provide you with the options of specialist mortgage lenders and you choose from the options as per your budget.

A market mortgage broker will help you find the best deal for your IVA mortgage. They will take care of all the paperwork and liaise with the bank on your behalf.

Next Steps-

If you have struggled with debt issues in the past and are now interested in getting a new mortgage with IVA. Our team of financial advisors will help you with finding the right mortgage option for you. We will also explain how it works and how much you can expect to pay back over a set period of time.

We will also help you figure out which type of mortgage best suits you and your family’s requirements.

Our expert advisers will also help you to assess your current situation and advise you accordingly.

Feel free to call us on 07912 076990.