Mortgage after an IVA

Getting a mortgage after an IVA (Individual Voluntary Arrangement) has finished may seem difficult, but is certainly possible. Although an IVA will remain on your credit report for 6 years; that’s not to say that you won’t be able to get a mortgage in this time. Some lenders will review an application the day after your IVA has ended.

It’s probably fairly obvious that getting a mortgage after an IVA will be more difficult than with a clean credit report. What isn’t so obvious; however, are the steps you can take to give yourself the best chance of being approved. Here are some of the ways you can do to get a mortgage once you’ve been in an IVA:

Request a completion certificate

The first thing you should do after finishing your IVA is to request a certificate of completion. Your insolvency practitioner (IP) will be able to provide you with this. It can be used as a way to evidence to lenders that you have successfully completed your IVA.

Get a good deposit together

Whilst some lenders will consider you for a mortgage, the higher your deposit, the higher your chances of approval. In your first year after your IVA or DMP (Debt Management Plan) has finished, it could be that you need a deposit as high as 50% of the property price in order for a lender to consider you. Even with a good deposit, adverse credit can affect you when applying for a mortgage and it’s likely you will only be eligible for higher rates.

As time goes on, chances are you won’t need to supply such a high deposit or incur as high-interest rates, provided you’ve managed your credit well. It could be that after 5 or 6 years of good credit management, you may be eligible for 90% or even 95% mortgages.

Save what you used to pay into your IVA

If you’re finding it hard to get a mortgage without stumping up a huge deposit, saving the amount you used to pay into your IVA could seriously help. You would have been used to making regular payments over 5-6 years since the start date of your IVA, so being disciplined and saving this will leave you in good stead for a deposit after a few years. This can also get you into a habit of making the repayments on your mortgage.

Assuming your IVA payment was £250 per month, after 5 years that amounts to £15,000 – which would pay for a deposit on a £150,000 house should you be eligible for a 90% LTV mortgage, which could be possible 5 years following the end of your IVA.

Improve your credit score

It will always be difficult to achieve a good credit score with an IVA or other debt solution showing on your credit file. However, by doing your best to manage your credit responsibly, it can leave you in a better position for when your IVA has less influence on your credit file. Because of this, it’s likely that your credit score has started to improve since completing your IVA. There are also a number of things you can do to improve your score even further.

Close unused accounts

You should close any credit accounts you have open that you don’t use. Some lenders will not only look at the outstanding debts on your credit file but also the credit limit you have available. Fewer, well-managed accounts may be better than a number of unused ones.

Make sure you’re on the electoral roll

Lenders will want to confirm your identity and address as part of an application, the best way to do this is making sure you’re on the electoral roll.

Have responsible credit

Whilst you shouldn’t take out credit for the sake of it, having responsible credit is beneficial to your credit score. Displaying an ability to repay credit that is lent to you is something lenders look on favourably. Repaying credit responsibly is a good way to repair your credit score.

Don’t make too many applications at once

Making a number of credit applications in quick succession can harm your credit rating. Lenders may think you are reliant on credit to supplement your income. Even if you’re making applications for different products, it’s best to space them out. If you’re thinking of making applications to see who will accept you or give you the best rate, you should consider applying through a specialist mortgage broker rather than high street lenders.

Mortgage brokers look through your circumstances and place you with the most appropriate mortgage lender on their panel. This means there is only one application made with a lender as they will place you with whoever is most suitable.

Clever Mortgages have access to 8 lenders who would consider lending into or after the completion of an IVA (Individual Voluntary Arrangement). To see how we could help please Read More.

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Why Clever Mortgages?

At Clever Mortgages we can offer you the support and advice required to ensure you get the right mortgage for your first home.  We provide access to a comprehensive range of mortgages from across the market. We are also authorised and regulated by the Financial Conduct Authority (FCA) and adhere to the Treating Customers Fairly (TCF) guidelines, so you can be confident that we will treat you with integrity and only recommend products that meet your needs.

Mortgage types

A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.

The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.

Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.

This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.

A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as they can allow you to pay slightly less than the bank's standard rate. However as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.

A tracker mortgage is basically a type of variable rate mortgage.  What makes them different from other variable rate mortgages is that they follow – track – movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.

A capped mortgage is the same as a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.

Offset mortgages are linked to a savings account as well as your current account. Your savings will be 'offset' against the value of your mortgage, and you'll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.

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