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Get a Mortgage During an IVA – The Expert Guide

Although discouraged, it is not impossible to take out new debt during an Individual Voluntary Arrangement (IVA). In fact, it is possible to get a mortgage during an IVA. However, there are numerous things worth taking into account before making the decision to do so.

You Will Need Permission from Your Supervisor for an IVA Mortgage

Before you can think about taking out any more debt, you need to understand the requirements of an IVA. With an IVA, you have to get permission from your Insolvency Practitioner for anything over £500.

If your supervisor thinks you’re taking on more than you can handle, they could say no to your request. If you go into debt without permission from your supervisor, it will violate the terms of your IVA.

IVA mortgages – Can You Afford a Mortgage During an IVA

When you are in an IVA, your income is divided into a budget, and you have to stick to specific spending limits. If you want to apply for a mortgage with a mortgage company, the IVA affect will mean that the interest rates will be higher because lenders see IVA borrowers as high-risk Getting a mortgage with an IVA will mean lenders will also expect a larger deposit.

While it’s doubtful you’ll have access to one large sum for a deposit (keep in mind, there are windfall clauses in your IVA), you could buy a home with a partner who is not subject to an IVA that has access to deposit funds in their own name.

Do not overextend yourself, and if you plan on getting a mortgage, you will need to tell the lender that you’re in an IVA. It might be best to consult with a specialist mortgage broker since a traditional mortgage lender may not offer products to people in your situation. It is recommended to use a mortgage calculator to estimate what your monthly mortgage costs would be at current rates to see if it is something that would be affordable.

Remember, if you over-commit and fall behind on your IVA payments, this could lead to breach and ultimately the failure of your IVA. And if you default on your mortgage, you could have your home repossessed.

After you’ve completed your IVA and made all required payments on time, you’ll have the monthly payment from your IVA to spare. Furthermore, your credit rating will start to improve as all the adverse credit data is removed from your credit file and your details are removed from the Insolvency Register. Therefore, it might be best to wait until you’re financially secure before buying a home until you have checked your credit record with all the main credit reference agencies.

Are You Already a Homeowner?

Owning a home has its benefits, one of which may be lower mortgage costs in comparison to what you’re currently spending on rent. Keep in mind that as a homeowner, you’ll be responsible for footing the bill for any repairs or maintenance that need to be done–that’s no longer your landlord’s responsibility.

If you already have a mortgage, it is highly improbable that you will get permission to buy another home. Most of the time, mortgage payments are not contributed by your IVA, meaning you will still be responsible for the full payment each month in addition to your IVA monthly installment. If you’re nearing the end of your IVA, it’s likely that you’ll have to attempt to remortgage your home and use the equity to pay into your IVA. Your Supervisor will expect you to liaise with specialist mortgage lenders who will take into consideration your credit history and all other information held on your credit report. Because of this, taking out a new mortgage before that time would be unwise.

In Summary

You can get a mortgage while you are on your IVA, but you should carefully think about your position first and make sure it is the best decision for you based on your financial circumstances.

Most mortgage lenders will not consider a mortgage application if you are still in an active IVA. This is because your credit file will show you have a poor credit history. If you aren’t confident in your choice, always ask for help from your IVA Supervisor or a specialist lenders who specialise in bad credit mortgages.

Further Guidance on Obtaining a Mortgage in an IVA or Applying For an IVA 

If you are considering entering into an IVA and you have questions about how it will affect your plans or are already in an IVA with us and are thinking about getting a mortgage, please contact one of our friendly professional advisors at Become Debt Free for to discuss your debt solution needs and whether an IVA is right for your circumstances.

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Customers can get free debt advice from the Money Advice Service – an organisation set up by the Government to offer free and impartial advice to those in debt. For more information from the Money Advice Service visit MAS is part of the Money & Pensions Service. We are not affiliated with MAS in any way.

Become Debt Free is a trading style of Re10 (Finance) Limited Registered Number 04651137.  Data Protection Act Registration Number – Z8613095

Become Debt Free specialise in providing and administering Individual Voluntary Arrangement (“IVA”) solutions to individuals based in England, Wales and Northern Ireland.  We do not administer Debt Management Plans, Debt Relief Orders, or any other debt solutions.  We only provide advice after completing or receiving an initial fact find where the individual(s) concerned meets the criteria for an IVA, therefore, all advice is given in reasonable contemplation of an insolvency appointment.

* To qualify for debt write off in an IVA with us, you must have a minimum of £7,000 of qualifying unsecured debt owed to two or more creditors.  The amount of debt write off is based on your own personal circumstances – typically this could be up to 85% of what you owe; and this has been achieved by over 10% of our customers who have successfully completed their IVA’s in the last 12 months.  The amount of debt write off differs for each customer and is dependent upon their individual financial circumstances and subject to the approval of their creditors.

Andrew Bowers is authorised in the UK to act as Insolvency Practitioner by the Insolvency Practitioners Association.


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