Can you apply for a mortgage after an IVA?

October 18, 2018

An individual voluntary arrangement (IVA) is a formal insolvency procedure that involves repaying creditors over a period of five or six years. Any debt remaining at the end of the term is written off, leaving you free to start afresh financially.

The impact of an IVA on your credit rating does make it difficult to secure borrowing during the IVA term, but what happens once the process comes to an end and you’re officially debt-free? Can you apply for a mortgage after your IVA?

Mortgages following an IVA

There’s nothing to prevent you from applying for a mortgage after your IVA has finished, but it’s helpful to understand how your application might be viewed by lenders, and also their reasons for taking this view.

One of the main factors when a lender assesses a mortgage application is the risk of default posed by the applicant. Initially, this influences whether or not the application is successful, and after that the type of mortgage product they’re willing to offer.

Your options are likely to be limited in this respect, but there are specialist mortgage providers who may be willing to lend.

Specialist mortgages after an IVA

Specialist mortgages exist for people with bad credit, and you may find that this is your only option. In this scenario you’re likely to be offered a mortgage with a high rate of interest, or one where a large deposit is required, as this reduces the risk to the lender.

Rather than submit multiple applications yourself, however, it’s a good idea to approach a mortgage broker who can search for suitable lenders without leaving a damaging trace on your credit file. Being refused a mortgage can harm your credit rating, and further exacerbate the situation you’re in.

Applying for a mortgage after an IVA

Your credit file is a major source of information used by all lenders. It provides details about your financial history, and enables them to anticipate your ability to repay in full without default.

Individual voluntary arrangements remain on your credit file for six years, so even though you may have successfully completed this insolvency process with no issues, you’ll still be viewed as a risk.

This is likely to be the case for some time, and until you’ve been able to build up your credit rating your options will be limited. So what can you do to increase your chances of obtaining a mortgage after your IVA?

How can you improve your chances of obtaining a mortgage following an IVA?

Here are a few ways you can boost your chances of successfully applying for a mortgage once your IVA has finished:

  • Check that the information in your credit file is correct:
    • Make sure defaults and other negative markers have been removed if appropriate
    • Register to vote so that lenders can see you live at a fixed address
    • Submit a notice of disassociation if you’re incorrectly financially linked to someone – an ex-partner for example
    • Don’t forget to check the information held by all three main UK credit reference agencies – these are Experian, Equifax, and Callcredit
  • Rebuild your credit rating
  • This can be achieved by using a credit builder credit card, used to pay for relatively small but regular monthly outgoings, such as fuel or food. By paying off this sum in full at the end of each month you slowly rebuild your credit rating.

If you would like more information on applying for a mortgage after an IVA, please contact one of the team at UK Debt to arrange a free same-day consultation. We can provide the professional guidance you need, and help you escape debt for the long-term.

Joanne Wright

Head Adviser at our Manchester Office

Tel: 0800 001 4247

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