Mortgage after an IVA explained

Getting a mortgage after an IVA

Worried about your IVA affecting your chances of getting a mortgage?

Getting a mortgage or remortgaging after you’ve been in an Individual Voluntary Arrangement (IVA) is a lot more straightforward (and achievable) than you might initially think. Not only can you get a mortgage at a rate that’s both competitive and affordable, but you can get access to mortgage funds now rather than having to wait years for your credit score to improve.

All you need is the right help!

IVA and mortgages explained

What is an IVA?

An IVA is a legally binding formal debt solution that allows you to make monthly payments towards your debts for a period of (usually) five years, with these payments being split fairly between your creditors.

This monthly payment will be determined by your monthly incomings and outgoings, and will be based on what you can reasonably afford to pay towards your debts each month.

After your IVA is over, any remaining unsecured debt will be written off. However, your IVA will remain on your credit file for a period of 6 years counting from the start date.

Can you get a mortgage after an IVA?

You certainly can – and at a fairly competitive rate too. Whilst it’s important to note that you won’t be able to get a mortgage from some of the more typical high street lenders, such as the big banks, there are still a range of mortgage deals out there that are suitable for you.

Here at Clever Mortgages we have access to 100s of lenders, and specialise in helping people with poorer credit ratings get access to the finance they need now rather than later. We work with specialist mortgage providers who are willing to look more favourably at past or current bad credit, and consider your application based on you as an individual rather than your credit score.

Will an IVA affect my mortgage?

To an extent, yes.

Your IVA will affect the rates and terms that you’re able to get a mortgage on. It’s likely that some of the more conventional lenders (such as large banks) won’t consider you, and you might find that the very best deals are reserved for people with high credit scores, and therefore unachievable for you at this time.

If you’re willing to accept this, however, then you’ll find that this is the only real way in which your IVA affects your mortgage.

You’ll still be able to get a mortgage, often for the amount you want too – it just won’t be at the most competitive rate on the market.

Alternatively, you can simply wait for your credit score to improve over time, which it will do if you manage your money carefully and fulfil all of your financial obligations. The problem with this is that it can take years for your credit score to significantly improve, and if you’re looking to move home now then this probably isn’t a realistic option.

Mortgage Advice

How much can I borrow?

How much you can borrow will depend upon criteria such as your annual salary, your current outgoings, your credit rating and any other income you might have. To make things easy, we’ve created our own easy-to-use mortgage calculator that can show you how much you’ll be able to borrow.

How long will it take to apply for a mortgage?

Whilst it usually takes between two weeks and a month for an application to be processed, due to COVID-19 restrictions we’re finding that mortgage lenders are taking a few weeks longer than usual to process mortgage applications. During this time your mortgage lender will take the time to review your application, survey your new property and underwrite your mortgage application.

Repayment vs Interest-only mortgages

It’s also very important to consider the type of mortgage you want to go for. There are two main options to choose from: repayment and interest-only.

A repayment mortgage is what most people think of when they imagine getting a mortgage; a loan is taken out in order to buy the house, and a monthly amount is paid back to the lender over a period of (usually) 25 years. Once this has all been paid back, the mortgage owner will own their house outright.

Interest-only mortgages work somewhat differently to this.

Instead of paying back a monthly sum which reduces the balance of the mortgage as well as covering any added interest, which is what a repayment mortgage does, an interest-only mortgage doesn’t actually pay back any of the money that’s been borrowed. With an interest-only mortgage the monthly payment simply pays back any interest that’s been accrued on a monthly basis. 

The total balance of the mortgage still has to be paid back at the end of the mortgage term, of course, and this is usually done via a lump sum or some form of repayment vehicle.

There are benefits and drawbacks of both type of mortgage, so if you’re unsure of which is the best type for you one, of our brokers will be more than happy to go over things with you in detail to help you find out which mortgage you should opt for.

Could I get a product transfer?

If you’re still in your IVA and are coming towards the end of your current product period, say a fixed rate, then you might be eligible for something called a product transfer.

This is where you get a new deal (such as a fixed rate) with your current lender at the end of your mortgage product period, instead of moving to what could be a higher standard variable rate. Because this often isn’t subject to credit score, it’s something you can do whilst you’re still in an IVA as opposed to remortgaging or getting a new mortgage. You are normally not allowed to borrow any additional funds with a product transfer. At Clever Mortgages we can help arrange a product transfer for you – just get in touch and we’ll see what options are available for you.

How much can I borrow?

You might have never had a mortgage before, or your financial circumstances might have recently changed. In either case, you might be unsure how much you can borrow for a mortgage. Our tool can help work this out based on your salary, combining your partner’s salary if it’s a joint mortgage.

How much can I borrow for the mortgage?

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Mortgage calculator

See how much your mortgage payments could be with our live mortgage calculator

Rates may differ based on your circumstances

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The mortgage application process

What do I need to apply for a mortgage?

Before you apply for a mortgage, you’ll need to get a few documents prepared to support your application. These include:

  • Identification – this can include a passport or driving license
  • Payslips from the last three months
  • Monthly outgoings
  • Utility bills
  • Proof of any benefits you’ve received
  • Current account bank statements from at least the last three months
  • P60 form from your employer
  • At least two years’ worth of account statements from an accountant if you’re self-employed

The application process

Here’s a quick, step-by-step guide to the mortgage process.

Step 1

Complete our online enquiry form and supply your initial details. We will contact you to discuss your requirements in more detail. We can determine how much you can borrow before moving forward.

Step 2

After we’ve taken a look over all of your details, we’ll scour the market for the best mortgage deals possible for your situation. We’ll then discuss any mortgage deals that match your criteria.

Step 3

If you’re happy with the mortgage we’ve recommended, the next step is getting a mortgage agreement, commonly known as an AIP or ‘Agreement in Principle.’ This essentially means that the mortgage provider agrees to lend you the money subject to final checks and approval of your chosen property.

Step 4

Once your AIP is accepted, the next step is to formally apply for the mortgage. If you’re applying through us, we’ll do this part for you. The mortgage provider will then conduct a formal valuation on the property to make sure it’s worth what you think it is or have offered to buy it for.

Step 5

If the property value is sufficient and after checking over the documentation you’ve provided, the mortgage lender will make a formal mortgage offer to you. Once you’ve accepted the mortgage offer, the solicitor can finalise all the legal work and arrange a completion date.

Step 6

You move into your new home or if a remortgage you will have switched lender and may have funds in your account for home improvements. You then begin making your mortgage repayments. Congratulations!

Why use a mortgage broker?

Mortgage brokers can help you find the best deals on the market – not just from one lender. With a broker you’ll get:

  • Valuable knowledge, through years of experience helping customers to find mortgages
  • An improved chance at finding a mortgage, some mortgages are only available through a broker
  • Help with the application process, as usually just one application can be used across various lenders
  • Advice on how to improve your chances, for instance getting a guarantor or applying for a joint mortgage

As a mortgage broker, we do all the hard work for you; once you’ve provided all of the necessary information mentioned above, we’ll get to work on finding the right deal for you, and keep you updated throughout every step of the process.

On top of making things easy for you, we’ll also be able to use our experience and relationships in the industry to get the best deal possible for your situation. We work with hundreds of different lenders, and as a result can get deals on mortgages that just aren’t available if you choose to go direct – this is especially useful if you’ve got bad credit, as this means that getting a good deal on your mortgage is usually even more difficult if you go direct.

We can also advise on things that you can do to help improve your chances of getting an improved deal, like opting for a joint mortgage or finding a guarantor.

So what does all this mean?

Essentially, you’ll be able to get a better deal in a shorter space of time, and with a lot less work and hassle from your end.

Ready to apply for your new mortgage?

Whatever the reason is that your credit score has been negatively affected, be it a CCJ, an IVA, arrears or something else, we believe that you should still be able to get the mortgage you deserve. We’ve helped thousands of people with poor credit scores get access to mortgage finance, so why not give us a call and find out how we could help you?

To find out what mortgages are available to you today, call our team on 0800 197 0504 – our opening hours are 9am to 5:30pm, Monday to Friday. Alternatively, just complete our simple online form to arrange a call back at a time that suits you.

Speak to a broker

Alison Tetlow

Alison is a specialist mortgage broker who has been working for Clever Mortgages for 7 years helping customers with bad credit and has over 25 years experience within the mortgage and housing market.

Call us on: 0800 197 0504

About Clever Mortgages

We specialise in assessing an individual’s situation, and finding the right mortgage solution for them. We can help:

  • With remortgages, buy-to-let, and first-time buyers mortgages. We have experts who cover these areas
  • Even if you’ve got bad credit – we help people every day with a variety of credit histories to find the right mortgage
  • With applications, as we’ll take the hassle away. We require your details once and we’ll know the best lenders for your circumstance
  • Our team know the lenders that are most likely to say ‘yes’, and give you the best rates

What should I do next?

  • You enquire online with us today or request a call back
    Our simple form takes a couple of minutes to fill in, this gets the ball rolling
  • One of our experts will give you a call to find out more about your situation
    We have experts in remortgaging, who focus solely on helping customers save money
  • We do all the hard work for you
    We search the market for the trusted lender that’s right for you
  • Our expert will get back in touch
    We can guide you every step of the way, and we’ll always keep you up-to-date with progress

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How to increase chances of getting a mortgage with bad credit?

There are steps you can take to help increase your chances of getting a mortgage with, or after bad credit is registered against you.

Keep up repayments:

Make sure you keep up all credit payments and any arrangements to pay up to date. Missing further payments can impact your credit score further and could risk your creditor taking further action. Keeping up your repayments can help show potential lenders that you are back on track and over time will help repair your credit score.

Avoid multiple credit applications:

If you’re looking for a mortgage with bad credit, you might struggle to find a mainstream lender that will accept your application and making several failed applications in a short space of time can impact your credit report.

Close old accounts:

If you’ve got any old credit accounts that you’re not using, make sure you close them. Having many open accounts can negatively impact your credit score, so closing unused ones can help boost your score.

Employment:

Like with all credit agreements, repayment ability is a big factor. Having stable employment, or consistent employment in the same field helps boost your application and make you a more attractive borrower.

Keep track of your credit report:

Whilst Clever Mortgages can run a credit report for you, there are three main credit reference agencies in the UK, Experian, Equifax and TransUnion. You can view your credit report online using these agencies. Your credit report shows you what lenders can see when they’re considering you for credit and keeping track of your report can help you better understand your credit and what influences it.

Save up a large deposit:

As with most bad credit circumstances, a large deposit vastly increases your chances of getting your mortgage application approved. With a large deposit, it means the amount you need to borrow is less, resulting in a lower LTV ratio. A lower LTV makes you a better prospect and less risky for a lender, meaning you’re more likely to get a better interest rate.

Going through a specialist bad credit broker like Clever Mortgages can help you find lenders that are likely to accept your application, sometimes accessing better rates and deals through the specialist lenders we work with.