How will an Individual Voluntary Arrangement (IVA) affect my chances of getting a mortgage?
If you’re on an IVA, the chances are that you won’t be able to get a new mortgage. You can’t take out any more than £500 credit without written approval from your IVA supervisor and it can be difficult to find a lender that will give you a new mortgage whilst on an IVA.
The main problem is the negative impact that the IVA has on your credit rating. All lenders carry out checks on your credit before accepting your mortgage application and will likely decline if they see an active IVA.
There are specialist lenders, however, that will look at offering mortgages to people in IVAs, though interest rates may be higher, the deposit required will likely be larger and every case is different so this isn’t a certainty.
Whilst you will have to wait until you’re IVA to be removed from your credit file, you will be able to get a mortgage after being put onto one.
An IVA will be removed six years after it was agreed or upon completion if it takes longer than that to clear. Once it’s been removed, your mortgage approval chances will increase, though it should be noted that some lenders may ask if you’ve ever had an IVA which may sway their decision.
Will other debt solutions affect my mortgage approval chances?
Whilst an IVA will disappear from your file after six years, or until it has completed, any other debt solutions will have a negative impact on your credit rating.
A debt management plan (DMP) is an informal solution, meaning that defaults can be added to your file whilst you’re on one. These can also stay on your record for six years, and the same goes for bankruptcy and CCJs.
Once they’ve been taken off your credit file, your credit score will begin to improve, and so will your chances of getting a mortgage. Though, as before, lenders will still ask if you’ve ever been subject to financial hardship such as a CCJ, bankruptcy or defaults, and this will affect their decision.
For advice on getting a mortgage with bad credit, or if you’re in an active IVA, speak to one of our expert advisers who will be able to help you with the next steps.