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.
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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.
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