How to Get a Mortgage with an IVA

In the world of personal finance, understanding how to navigate complex scenarios is essential. If you’re dealing with an Individual Voluntary Arrangement (IVA), you may be wondering how this impacts your ability to secure a mortgage. In this comprehensive guide, we delve into the process of obtaining a mortgage with an IVA in the UK.

What is an IVA?

An IVA is a formal agreement made between an individual and their creditors to repay a portion of their debts over a specific period. This arrangement allows the individual to manage their debts more effectively, but it can also have ramifications on their credit history and financial opportunities, like securing a mortgage.

The challenges of securing a mortgage with an IVA

When you have an IVA, obtaining a mortgage can be more complex for several reasons:

Credit score impact: An IVA negatively impacts your credit score and remains on your credit file for six years, which potential mortgage lenders will consider.

Lender’s perceptions: Many lenders may perceive you as a higher risk because of the IVA, making them less likely to approve your mortgage application.

Unfavourable mortgage terms: If a lender does approve your mortgage application, the terms might be less favourable, potentially requiring a higher deposit or charging a higher interest rate.

Strategies for obtaining a mortgage with an IVA

Although securing a mortgage with an IVA can be challenging, it’s not impossible. Here are several strategies that can improve your chances:

Engage specialist lenders: Certain lenders specialise in providing mortgages to individuals with poor credit histories, including those with an IVA. These lenders will evaluate your application on its merits, taking into account your unique circumstances.

Improve your credit score: While you can’t erase the IVA from your credit history until six years have passed, you can start rebuilding your credit score in the meantime. Timely repayment of your IVA and other bills, maintaining a stable address and employment history, and demonstrating responsible use of credit can all contribute to improving your credit score.

Save for a larger deposit: A larger deposit can lower the loan-to-value ratio (LTV), which can help offset the risk for lenders and potentially unlock more favourable mortgage terms.

Be transparent: Being upfront about your financial situation and the existence of an IVA can help build trust with potential lenders. It’s important to be honest and open about your financial history when applying for a mortgage.

Engage a mortgage broker: A mortgage broker who has experience in adverse credit circumstances can help guide you through this process. They can provide advice tailored to your situation and connect you with lenders that you might not be aware of.

Consider a Joint mortgage: If you have a partner with a good credit rating, they could apply for the mortgage, with you contributing towards the deposit and mortgage repayments.

Wait until your IVA is over: While not always possible, if you can wait until your IVA is completed and cleared from your credit record, you may have access to better mortgage deals.

In summary, while securing a mortgage with an IVA can be challenging, it’s not an insurmountable obstacle. By understanding the impact of an IVA on your ability to obtain a mortgage and following the strategies outlined in this guide, you can increase your chances of securing a mortgage. Always seek advice from a mortgage advisor or broker who is knowledgeable about IVAs and mortgages to help you navigate your unique circumstances. Remember, while an IVA does present a hurdle, with careful planning and patience, it doesn’t have to be a barrier to owning your own home.

Related articles:

How to Work with Specialist Lenders for Mortgages with an IVA

Can you get a mortgage after an IVA?

How much can I borrow?

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