Mortgage Possibilities with an IVA: Steps to Your Dream Home

Every detail matters when it comes to getting approved for a mortgage. One such detail that can make a big difference is an Individual Voluntary Arrangement (IVA). Whether you’re already familiar with IVAs or just hearing about them for the first time, understanding how they can affect your chances of getting a mortgage is crucial. 

So, without wasting further time, let’s break it down together in this article…

Can I Get a Mortgage with an IVA?

Yes, it is possible to get a mortgage in the UK even if you have an Individual Voluntary Arrangement (IVA). 

While traditional high street banks may have strict criteria regarding IVAs, there are specialised mortgage providers who take a more personalised approach to underwriting. 

Therefore, keep in mind that having an IVA on your record doesn’t automatically disqualify you from obtaining a mortgage. However, it will be taken into consideration during the application process.

Will an IVA Affect Getting a Mortgage?

Yes, having an Individual Voluntary Arrangement (IVA) can indeed affect the terms of your mortgage. While it may not be the sole factor leading to a rejection, it will influence the specifics of the mortgage deal you’re offered. 

Lenders typically adjust the terms to manage their risk and ensure affordability for you as the borrower. 

This adjustment may involve variables such as the interest rate offered and the required size of your deposit.

Will an IVA Affect Getting a Mortgage?

Yes, an Individual Voluntary Arrangement (IVA) can impact your mortgage application by affecting your credit report, which is a key factor in the lender’s assessment process. 

While an IVA indicates past financial difficulties, it also demonstrates responsibility and efforts to rectify the situation. 

Compared to bankruptcy, an IVA is generally considered less detrimental to your mortgage chances. 

Mortgage lenders evaluate the level of risk you pose and may reject applications if the potential reward of granting a mortgage doesn’t outweigh the associated risk.

Understanding the risk you present with an IVA

Understanding the risk associated with an Individual Voluntary Arrangement (IVA) is essential when applying for a mortgage. Mortgage lenders assess various aspects of your finances to determine your eligibility, with key factors including your credit history, income, affordability, and the loan-to-value (LTV) ratio.

Your Credit History:

While an IVA on your credit report signals past financial challenges, its impact diminishes over time. Lenders typically consider the timing of your IVA and your credit behaviour following its conclusion. 

A healthy credit report post-IVA demonstrates responsible financial management, mitigating some of the risk for lenders.

Your Income:

Income stability and amount significantly influence your mortgage application. Specialised lenders may offer more flexible terms for borrowers with diverse income sources, such as self-employed individuals or those with multiple income streams.

Your Affordability:

Lenders scrutinise your affordability, evaluating your disposable income after deducting expenses. 

Cutting unnecessary expenditures before applying for a mortgage enhances your affordability assessment. 

Additionally, lenders conduct stress tests to ensure you can afford the mortgage even in challenging circumstances.

Loan-To-Value (LTV) and Deposit:

The LTV ratio, representing the loan amount relative to the property value, impacts the mortgage terms. Lenders typically offer lower LTV ratios for borrowers with recent IVAs, gradually increasing as creditworthiness improves. 

Higher LTV mortgages require larger deposits, offering greater security to lenders.

Understanding these factors helps you navigate the mortgage application process effectively, improving your chances of obtaining a mortgage despite past financial challenges.

Types of Mortgages Available with an IVA: 

In the UK, individuals with an Individual Voluntary Arrangement (IVA) have access to various types of mortgages tailored to their specific financial circumstances. 

These include:

1. Specialist IVA Mortgages: These mortgages are specifically designed for individuals with IVA. They are offered by specialist lenders who understand the complexities of IVA and may be more flexible in their eligibility criteria and terms.
2. Fixed-Rate Mortgages: Fixed-rate mortgages offer a set interest rate for a predetermined period, typically ranging from two to five years. This provides stability and predictability in monthly repayments, which can be beneficial for borrowers with IVA seeking to budget effectively.
3. Tracker Mortgages: Tracker mortgages have interest rates that are linked to the Bank of England’s base rate, fluctuating in line with changes in the economy. Borrowers with IVA may consider tracker mortgages if they anticipate interest rates remaining low or decreasing in the future.
4. Discounted Rate Mortgages: Discounted rate mortgages offer a discount on the lender’s Standard Variable Rate (SVR) for a specified period, usually the first few years of the mortgage term. This can result in lower initial monthly repayments, making it an attractive option for borrowers with IVA seeking affordability in the early stages of homeownership.
5. Variable Rate Mortgages: Variable rate mortgages have interest rates that can fluctuate over time, typically in line with changes in the lender’s SVR. While this offers flexibility, borrowers with IVA should be prepared for potential increases in interest rates and monthly repayments.
6. Buy-to-Let Mortgages: Individuals with IVA who are considering purchasing a property for rental purposes may explore buy-to-let mortgages. These mortgages are specifically designed for landlords and may have different eligibility criteria and terms compared to residential mortgages.
7. Help-to-Buy Mortgages: The UK government’s Help-to-Buy scheme offers assistance to first-time buyers and home movers by providing equity loans or mortgage guarantees. Borrowers with IVA may explore Help-to-Buy mortgages as a way to access higher loan-to-value ratios and lower deposit requirements.

When considering the types of mortgages available with an IVA, it’s essential for you to carefully assess your financial situation, seek advice from mortgage brokers specialising in IVA, and compare multiple mortgage options to find the most suitable solution for their needs.

Documentation and Requirements for Mortgage Approval with an IVA:

When applying for a mortgage with an Individual Voluntary Arrangement (IVA) in the UK, you need to fulfil specific documentation and requirements to increase your chances of approval. 

Here are the key documents and steps typically involved:

1. Proof of Income: Lenders require evidence of stable income to assess your ability to repay the mortgage. This includes recent payslips for employed individuals, tax returns and accounts for self-employed individuals, and proof of other income sources such as rental income or investments.
2. Proof of Identity and Address: You’ll need to provide valid identification documents, such as a passport or driving license, to verify your identity. Additionally, proof of address, such as utility bills or bank statements, is required to confirm your residency.
3. Details of the IVA: You’ll need to provide documentation related to your IVA, including the IVA agreement, confirmation of payments made, and any correspondence with the insolvency practitioner overseeing the arrangement. This helps lenders understand the terms and status of your IVA.
4. Credit Report: Lenders will assess your credit report to evaluate your financial history, including the presence of the IVA and any other outstanding debts or credit issues. It’s essential to review your credit report beforehand to ensure accuracy and address any discrepancies.
5. Affordability Assessment: Lenders conduct affordability assessments to determine whether you can afford the mortgage repayments alongside your existing financial commitments. This involves analysing your income, expenses, and debt obligations to assess your ability to manage the mortgage responsibly.
6. Deposit: Saving for a deposit is crucial when applying for a mortgage, especially with an IVA. Lenders may require a larger deposit to mitigate the perceived risk associated with the IVA. The deposit amount typically depends on the loan-to-value (LTV) ratio and the lender’s policies.
7. Additional Documentation: Depending on your individual circumstances and the lender’s requirements, you may need to provide additional documentation, such as bank statements, proof of savings or investments, and explanations for any adverse credit history or financial irregularities.

It’s important to work closely with a mortgage advisor or broker specialising in IVAs to navigate the documentation and requirements effectively. They can provide personalised guidance, help you gather the necessary documents, and identify mortgage options tailored to your financial situation and objectives.

What is the role of mortgage brokers for individuals with IVAs?

Mortgage brokers specialising in IVAs play a vital role in helping individuals with Individual Voluntary Arrangements (IVAs) to secure suitable mortgage deals. These brokers possess extensive knowledge of the mortgage market and understand the complexities of IVAs and their impact on mortgage applications. 

They have access to a wide network of lenders, including specialist providers who offer mortgages tailored to borrowers with IVAs. Brokers assess each client’s financial situation and offer personalised advice, recommending mortgage solutions that align with their needs and affordability. 

They negotiate with lenders on behalf of their clients to secure favourable terms and streamline the application process, handling paperwork and communication with lenders. 

Throughout the process, brokers provide ongoing support and guidance, empowering clients to achieve homeownership despite past financial challenges.

The importance of long-term financial planning for individuals with IVAs

Long-term financial planning is crucial for individuals with Individual Voluntary Arrangements (IVAs) as it lays the groundwork for achieving financial stability and long-term goals, such as homeownership. 

You can improve your financial health and increase your chances of securing a mortgage by budgeting effectively, saving for a deposit, and managing debts responsibly. 

Building a good credit history, maintaining an emergency fund, and planning for retirement also contribute to overall financial well-being. Such long-term financial planning will help you in great deal, even with IVA in your credit report, to navigate financial challenges, achieve homeownership, and work towards future financial security.

Final Thoughts 

Getting a mortgage with an IVA is possible, but it comes with some challenges. Having an IVA might affect the terms of your mortgage, but there are lenders who understand and may still approve you. It’s important to show that you’re financially responsible post-IVA, which can help your case.

There are different types of mortgages available for people with IVAs, ranging from specialist IVA mortgages to government-backed Help-to-Buy schemes. Working closely with mortgage brokers specialised in IVAs can provide invaluable guidance, helping you navigate the documentation requirements and identify suitable mortgage options.

Long-term planning, like budgeting and saving, is crucial for improving your financial situation and increasing your chances of getting a mortgage.