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The complete guide to IVA mortgages

Getting a mortgage with an IVA isn't always easy, so we're going to explain the key facts for you

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 14 August 2022

8 min read

The complete guide to IVA mortgages

There are lots of different reasons for getting in to an Individual Voluntary Arrangement (IVA). Getting a mortgage with an IVA can be difficult so here’s a guide to tell you some of the things that you’ll need to think about and how to go about it. 

Every mortgage lender has its own lending criteria that will determine whether they would be prepared to lend to someone with an IVA and on what basis. 

IVA stats UK 

According to IVA stats provided by gov.uk the levels of Individual Voluntary Arrangements have been gradually increasing for the past two decades. 

Following a sharp decline in the numbers of IVA’s during the COVID-19 pandemic, the numbers are in the up again. This can be attributed to the level of financial support that was provided by the government through lockdown. 

IVA’s make up a significant part of all individual insolvencies in England and Wales. Between Q3 2021 and Q3 2022, IVA’s made up over 74% of all individual insolvencies which is a major increase on previous levels. 

The table below shows a breakdown of the numbers of individual insolvencies in England and Wales from Q3 in 2021 to Q3 in 2022. 

 Total number of individual insolvencies Bankruptcies Debt Relief Orders (DRO’s) Individual Voluntary Arrangement (IVA’s) 
Q3 2021 27,302 1,960 5,735 19,607 
Q4 2021 27,655 1,828 5,863 19,974 
Q1 2022 32,021 1,707 6,629 23,685 
Q2 2022 29,361 1,647 5,869 21,845 
Q3 2022 27,927 1,713 5,579 20,635 

According to the Wikipedia definition, an Individual Voluntary Arrangement (IVA) is a contractual alternative in England and Wales for people to avoid bankruptcy. The same equivalent debt solution in Scotland is called a protected trust deed

Individual Voluntary Arrangements (IVA’s) were originally started as Part VIII of the Insolvency Act 1986. The arrangement is made by an insolvency practitioner on behalf of a debtor, to their creditors a formal proposal of an arrangement to repay debts. 

The sole purpose of an IVA is to help people by consolidating their debts in to one manageable monthly payment. An IVA will stay on your credit file for 6 years and will be removed after this as a standard process.  

What is an IVA mortgage? 

There isn’t such a thing as an actual IVA mortgage, this is just a term that is used to describe a mortgage for someone with an IVA. 

IVA mortgages are usually available through a select few high-street lenders and some more specialist mortgage lenders. Generally there will be specific terms and criteria from the mortgage lender for assessing credit histories with an IVA. 

Can you get a mortgage with an IVA? 

The simple answer is usually yes, you should be able to get a mortgage with an IVA, even it is has not been satisfied. 

There are lots of different elements to be taken in to account by mortgage advisers and mortgage lenders when reviewing a new application, especially those with adverse credit. Your credit score, credit history and financial circumstances play a major part of your eligibility for a new mortgage loan. 

In terms of the severity of different levels of bad credit, an IVA is not considered to be the worst type of poor credit. In the grand scheme of things, generally a bankruptcy and mortgage arrears are both considered higher risk for mortgage lenders. 

Some restrictions include: 

  • Lower Loan-to-Value (not able to borrow as much) 
  • Lower income multiples 
  • Restricted terms 
  • Fewer products 
  • Less lenders to choose from 

The lenders that will offer mortgages to people who have had or currently have an IVA, can be limited, and can change from time to time. 

There are many different elements and factors to getting an IVA mortgage, so here are just a few options that we know might be available. 

  • Buckingham Building Society 
  • Blue Stone Mortgages 
  • Darlington Building Society 
  • Skipton Building Society 
  • MBS Lending 
  • Vida Homelaons 

How can I improve my chances of getting an IVA mortgage? 

There are several things that you can do over time to help improve your chances of getting a mortgage with an IVA, and reducing the interest rates. 

The key element to this process will be time and especially after 6 years at the point that your IVA is removed from your credit file. The other critical part of this is improving your credit score which will inevitably be damaged because of your IVA. 

The best ways to improve your credit score for getting a mortgage after an IVA are: 

  • Get your credit score and try to manage this more effectively, there are a number of apps and websites that give you access to this (e.g. Credit Karma, ClearScore and Totally Money). You can view your credit score and see what is affecting your score at any time. 
  • Manage your credit and debts more effectively. By managing your credit and personal finances better, you’ll naturally see your credit score over time. Don’t take on unnecessary debts such as credit cards or store cards. 
  • Be patient is also a key element to getting lower mortgage rates and making applying for a mortgage easier. Time is definitely a big part of getting a mortgage when you’ve had an IVA. 
  • Save a bigger deposit means that the lender will look more favourably on your mortgage application. Lower loan to value means that the risks for the lender is lower and therefore rates will inevitably be better. 

In reality, any adverse or bad credit will have an effect on applying for a new mortgage or remortgage. 

Mortgage lenders use credit scores to assess your ability to repay your mortgage and to see what your recent credit history looks like. Any recent or current IVA’s will be factored in to the assessment of your suitability for a mortgage loan. 

An IVA won’t usually mean that you can’t get a mortgage, but it can have a significant effect on getting a mortgage. There are several potential things that might happen based on your other circumstances and the details of the IVA itself, such as: 

  • Higher interest rates 
  • Lower borrowing limits (e.g. loan to value limits) 
  • Stricter affordability rules 
  • Specialist lenders 

Affordability and your ability to repay the mortgage will be concern for lenders for someone who has been in or is currently in an IVA. Lenders have a responsibility to make sure that borrowers don’t get in to further financial difficulties. 

Can I get a joint mortgage with an IVA? 

When you apply for a joint mortgage (mortgage in joint names), lenders will combine the applicants and treat them as a single entity. This means that if there is bad credit or credit history issues, then those will be considered as if it was a single person. 

If both applicants have credit history problems, then both would be factored in with the mortgage application. 

There is a possible solution for a joint application where one of the applicants has an IVA or any other bad credit. If it is possible based on affordability to use one of the applicants that does not have bad credit, then this is usually the best option. 

How long after an IVA can I get a mortgage? 

Generally as a rule, your IVA will be removed from your credit file after 6 years, this will make it much easier and more likely that you’ll be able to get a mortgage. 

There are several points over time that will improve your chances of getting a mortgage after an IVA. The reality is that people with bad credit will usually repair their credit and improve their credit score over several years. 

Timescales for getting a mortgage during or after an IVA: 

  • 1 to 5 years (active IVA) can be more difficult to get a mortgage and generally only able to get a mortgage with specialist lenders 
  • 1 to 5 years (satisfied IVA) will be easier to apply for a mortgage once your IVA has been settled and time has passed 
  • Over 6 years once your IVA has been removed from your credit file and you can start to repair your credit score then options will increase 
  • Over 6 years when your credit score has improved and your credit profile looks normal means that you’ll be able to apply for a mortgage as a standard borrower 

Do I have to declare an IVA on my mortgage application? 

Yes, if you’ve had an IVA in the past and you are asked to disclose information about bad credit then you’ll need to tell your mortgage adviser or lender. 

Failing to disclose information about bad credit can have a serious impact on your mortgage application and any future applications. All lenders will perform a credit check as part of the application process and 99.9% of occasions will find out anyway. 

Ultimately, if you have an IVA within 6 years that shows on your credit file, then this will be picked up. So if you fail to let your mortgage adviser know about it then you’ll be wasting your time and theirs. 

Can I get a mortgage with an active IVA? 

There’s a process that you’ll need to follow if you have an active IVA and you’ll need to speak to several people. It is more than likely that you’ll be speaking to a specialist mortgage lender if you have an active IVA. 

Here are the steps to follow for getting a mortgage with an active IVA: 

  • Speak to your insolvency practitioner first to let them know that you’ll be looking for a mortgage because it is them that control your financial arrangements. Any new credit agreements over £500 per month will need to be approved as a rule. 
  • Insolvency practitioner approval will mean that they agree that they believe that the loan is affordable for you based on the interest rates and repayments. 
  • Find a lender that will accept an application from a borrower with an active IVA. This will usually be a specialist lender and you should speak to a qualified mortgage specialist to find the best lenders for this. 
  • Apply for your mortgage and be prepared that the interest rates will inevitably be higher than standard mortgage rates. You should also have a bigger deposit if you’re buying a property or be prepared that the lender may offer less. 

Can you do an IVA if you have a mortgage? 

If you are forced to enter in to an IVA and you have a current mortgage, this should not form part of the IVA agreement. If you own a property then this should form part of the valuation for the IVA, but the mortgage should remain separate to the debts being consolidated. 

How to get an IVA mortgage 

The quickest and easiest way to get an IVA mortgage is to get proper advice from a qualified and experienced mortgage specialist

You might be able to get a mortgage either direct from your bank or building society in certain circumstances, but this might cost more. You also might be able to apply for a mortgage online with an IVA but options might be limited. 

Options for different ways to get an IVA mortgage will increase over time as your credit profile improves. 

Resources

Bank of England – Mortgage lenders and Administrators statistics 2022

Citizen’s Advice – Check what an IVA is

Gov.uk – Options for paying off your debts (IVAs)

StepChange – Individual Voluntary Arrangement (IVA)

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