IVA Mortgage Articles
If you are looking for a mortgage but you have been in a situation where you have taken an IVA (Individual Voluntary Arrangement) this section of the site may well help. Here you will find links to our IVA mortgage articles which explain the facts you need to know before making any kind of decision about which mortgage is right for you with your current circumstances.
Let’s start with the basics of IVA Mortgages
IVA mortgages are mortgages specifically designed for people who have entered into an Individual Voluntary Arrangement or IVA to manage their debt repayment.
What is an IVA?
An IVA is an Individual Voluntary Agreement. It is a legal contract between a borrower and their creditor(s) which constitutes an alternative to bank bankruptcy. The aim of an IVA is to limit or reduce a person’s level of outstanding debt, so it can be cleared or paid off within a five year period. An IVA allows the borrower or debtor to pay a set sum towards repayments to creditors each month for a period of up to five years. At the end of that time, the debt is cleared. IVA mortgages are designed for people in these circumstances.
An IVA is voluntary on both sides, so if a debt is extreme, creditors may not agree to an IVA, and this would leave the individual concerned with bankruptcy as the only option. In order for an IVA to work, creditors who represent 75 per cent (by value) of the debt must agree to the IVA. A debt counsellor is a good source of advice before entering into any legal agreement, whether an IVA or bankruptcy. The counsellor may be able to point you to sources of advice on IVA mortgages.
An IVA should be entered into with the help of a licensed Insolvency Practitioner. It is possible to reduce the level of debt by around 75% and clear the debt within 5 years, but as an alternative to bankruptcy it still carries some restrictions. An IVA is a legally binding agreement, and it will affect your credit rating. This means that an IVA will impact your ability to obtain credit such as a loan or mortgage. That’s where IVA mortgages come in.
Mortgages and IVA
An IVA will impact your credit rating, which will in turn affect your ability to get further credit. This includes a mortgage. The good news, however, is that there are specialist companies who can provide IVA mortgages for those who have entered into an IVA. There are several lenders who provide IVA mortgages.
The difficulty with an IVA is that it does not simply affect your credit rating while it is in effect, it also remains on your credit record for six years after it has been satisfied, just as a bankruptcy would do. This can make it very difficult to get a mortgage other than IVA mortgages.
A specialist lender providing IVA mortgages will look at when your IVA was satisfied, and lending conditions vary. A lender will take arrears, CCJs etc into account, as well as your repayment record. Rates for IVA mortgages are higher than for regular mortgages, as a borrower is classed as high risk due to their previous debt. But IVA mortgages are a means of obtaining a mortgage, and can restore your credit rating to good standing so you can remortgage in the future to a more attractive rate.