Can You Get a Mortgage With an IVA?

An Individual Voluntary Arrangement (IVA) offers a structured path to manage overwhelming debt and achieve financial stability. While an IVA, or its recent completion, impacts an individual’s financial profile, securing a mortgage is still possible. This process is more intricate than for applicants without such a history, but not out of reach. Many explore homeownership after addressing past financial challenges, making this journey a common inquiry.

Understanding IVAs and Mortgage Eligibility

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between a debtor and their creditors to repay debts over a specified period, typically five or six years. An insolvency practitioner oversees this arrangement, structuring affordable payments. The primary impact of an IVA is on an individual’s credit history, appearing as a mark of formal insolvency.

While an IVA is active, obtaining a mortgage is exceptionally difficult, as few lenders consider such high-risk applications. The IVA remains on a credit file for six years from its start date, even if completed earlier. This period directly influences when lenders may view an applicant more favorably.

After the IVA is successfully completed, and marked on the credit file, the chances of securing a mortgage significantly improve. While the IVA remains visible for the full six-year period, lenders recognize the successful resolution of past debts. Some specialist lenders may consider applications as soon as the IVA is settled, though most conventional lenders prefer a clean credit history for one to three years after the IVA concludes.

Factors Influencing Mortgage Approval

Lenders assess several factors when considering mortgage applications from individuals with an IVA history. A primary consideration is the successful completion of the IVA, evidenced by a formal completion certificate. This document proves all terms of the agreement were met, demonstrating financial responsibility.

Rebuilding a positive credit history following the IVA is important. This involves managing new credit responsibly, such as mobile phone contracts or small credit cards, and consistently making all payments on time. Lenders look for a sustained period of responsible financial behavior, indicating an improved ability to manage debt.

The size of the deposit plays a role in improving approval chances. A larger deposit, often 15% to 25% or more, substantially reduces the lender’s risk. This larger personal investment demonstrates commitment and financial discipline.

Income stability and affordability are scrutinized. Lenders require proof of stable employment and sufficient income to cover mortgage payments and living expenses. A low debt-to-income ratio, excluding the resolved IVA debt, is favorable, assuring lenders of the applicant’s capacity for new financial obligations.

Preparing Your Mortgage Application

Preparation is important for individuals applying for a mortgage after an IVA. A first step involves obtaining and reviewing personal credit reports from major credit reference agencies, such as Experian, Equifax, and TransUnion. This review helps identify inaccuracies and provides a clear picture of credit standing post-IVA.

Gathering financial documentation is essential. This includes recent payslips, typically covering the last three to six months, and P60s for the past two to three years to verify stable income. Bank statements, usually for the last six to twelve months, are needed to show income, expenditure, and savings.

Proof of the mortgage deposit, such as savings account statements, is a requirement. The official IVA completion certificate is necessary as it confirms the successful discharge of the arrangement. Standard identification and address verification documents, such as a passport or driver’s license and recent utility bills, are also needed.

Conducting a personal budget and affordability assessment before approaching lenders helps set realistic expectations. This involves an analysis of income versus expenses to determine a sustainable monthly mortgage payment. Understanding personal affordability ensures any mortgage aligns with current financial capacity.

Navigating the Mortgage Application Process

The mortgage application process for individuals with an IVA history begins with identifying specialist lenders. Mainstream lenders have stricter criteria, making them less likely to approve adverse credit applications. Specialist or “adverse credit” mortgage lenders are more accustomed to evaluating such financial backgrounds and may offer tailored products. Engaging a mortgage broker specializing in adverse credit cases is beneficial, as they access a wider network of niche lenders.

Once a potential lender is identified, the next step involves an initial inquiry and securing an Agreement in Principle (AIP). An AIP estimates how much a lender might lend, based on preliminary financial information. While an AIP is not a guaranteed mortgage offer, it indicates eligibility and can be useful when making a property offer.

Following a successful AIP, a full mortgage application is submitted, accompanied by all prepared documentation. This allows the chosen lender to conduct a thorough assessment. The application then moves into the underwriting phase, where the lender’s underwriters review the borrower’s financial information (credit history, income, assets, debt-to-income ratio) to assess risk.

During underwriting, further information might be requested, and the lender will perform a property valuation to ensure the property’s value supports the loan. If criteria are met and risk is acceptable, a formal mortgage offer is issued. Conversely, an application can be declined during underwriting if discrepancies arise, financial situations change, or the property does not meet the lender’s criteria.