The UK’s Right to Buy scheme has helped thousands of tenants transition to homeowners by purchasing their council properties at discounted rates. However, if you’re dealing with an Individual Voluntary Arrangement (IVA), you might wonder whether you can still qualify for a Right to Buy mortgage. The good news is that while securing a mortgage with an IVA can be challenging, it is not impossible. This article explores how you can achieve your homeownership dreams under the Right to Buy scheme despite having an IVA on your credit file.
The Right to Buy scheme allows eligible council and housing association tenants in England to purchase their homes at a significant discount. Discounts can vary depending on how long you’ve lived in the property, its type, and location, but they can go as high as £96,010 outside London and £127,940 within London (as of 2024).
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors to repay a portion of your debts over a set period, typically five or six years. While an IVA can help you regain financial stability, it negatively impacts your credit score, making traditional lending options harder to access.
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Contact us nowSecuring a Right to Buy mortgage with an IVA is possible, but it requires careful planning and understanding of your financial situation. Lenders may consider you a higher-risk borrower, but specialist lenders cater to people with adverse credit, including those with IVAs.
Here are some key factors to consider:
If you’re keen on purchasing your council home under the Right to Buy scheme while dealing with an IVA, follow these steps:
Ensure you meet the eligibility criteria for the Right to Buy scheme, including tenancy length and property type.
Obtain a copy of your credit report from agencies like Experian, Equifax, or TransUnion. Look for inaccuracies or outstanding debts that may hinder your application.
Work with a mortgage broker who specialises in Right to Buy and adverse credit to explore your lending options.
Mortgages for those with IVAs often come with higher interest rates. Factor this into your budget to ensure long-term affordability.
If obtaining a mortgage with an IVA proves too difficult right now, you can take steps to prepare for homeownership in the future:
Yes, you can apply for a Right to Buy mortgage if you have an IVA, but your options may be limited. Many mainstream lenders may reject your application due to your credit history, but specialist lenders cater to individuals with IVAs. Working with a mortgage broker can increase your chances of approval.
The discount you receive under the Right to Buy scheme can often be used as a deposit. However, because of your IVA, some lenders may still require an additional deposit, which is typically 10–15% of the property’s value.
Yes, having an IVA will likely result in higher interest rates. Lenders view applicants with IVAs as higher-risk borrowers, so they charge increased rates to mitigate that risk. Comparing lenders or consulting a specialist broker can help you find the best available deal.
Yes, it is possible to secure a Right to Buy mortgage even if your IVA is still active, but this is less common. You’ll need the approval of your IVA supervisor, as taking on a mortgage is a significant financial commitment. A mortgage broker can help you find lenders willing to consider such cases.
Defaulting on your mortgage while in an IVA can have serious consequences, including the risk of losing your home. It’s essential to ensure that your mortgage payments are affordable before proceeding with your application. Speak to your IVA supervisor and lender to ensure the arrangement is manageable.
To improve your chances:
Once your IVA is completed, it will remain on your credit file for six years from the start date. After this period, it is removed from your record, making it easier to secure a mortgage. However, some lenders may consider applications sooner, especially if you can demonstrate financial stability.
No, your IVA will not affect your eligibility for the Right to Buy scheme itself. The council or housing association will assess your tenancy eligibility, not your financial situation. However, obtaining a mortgage to fund the purchase is where the IVA may impact your options.
Yes, some lenders may allow you to use a guarantor to improve your chances of approval. A guarantor with a strong credit profile can reassure lenders of your ability to meet mortgage repayments.
Yes, you must consult your IVA supervisor before applying for a mortgage. They need to approve the additional financial commitment and ensure it won’t jeopardise your IVA arrangement. Open communication with your supervisor is essential.
While there aren’t specific government schemes for buyers with IVAs, the Right to Buy scheme itself provides significant discounts, which can reduce the financial burden. Specialist lenders may also offer tailored mortgage products for those in financial recovery.
You’ll typically need:
If you’re not ready to buy now, you can:
