Can I get a mortgage with an IVA?

An IVA could be the ideal solution to help you get on top of your debt. But can you get a mortgage with an IVA? Let’s find out.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young casual man and girl using laptop while looking at invoice and plan the budget to save.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Getting on the property ladder is a dream for many. However, for those with debts that are out of control and a poor credit rating, getting a mortgage might feel unattainable. An IVA could help you get on top of your debts to make your dream a reality. Let’s find out whether an IVA is right for you and whether you can get a mortgage with an IVA.

[top_pitch]

What is an IVA?

IVA stands for individual voluntary arrangement. It is a legally binding agreement between you and your creditors to repay all of your debts by collecting and converting them into a single monthly payment.

IVAs work through insolvency practitioners (IP), who act as intermediaries between you and your creditors. The insolvency practitioner draws up a proposal indicating how you will repay your debts within five to six years.

Basically, you will be paying the IP a single monthly payment. The IP will then distribute the payment to your creditors based on how much the proposal indicates. The IP may also collect a fee for their services.

Is an IVA a good idea?

In a word, yes. However, it’s a good idea to speak to an IP to determine whether an IVA is right for you based on your unique circumstances before you proceed.

An IVA can help to show lenders that you are taking responsibility for your debts and working towards a better credit score.

[middle_pitch]

Can I get a mortgage with an IVA?

Yes, it’s possible. However, it can be challenging. Debts affect your credit score, especially if you have financial difficulties. Your credit score is one of the first things lenders consider when determining whether your mortgage application will be successful.

An IVA may help to get your debts under control, but it will show on your credit report. Most mortgage lenders view borrowers with IVAs as high risk, meaning it can be difficult for your mortgage application to succeed.

Additionally, even if you find a lender that will agree to give you a mortgage, the terms may not be favourable.

It might be best to consult a financial adviser or mortgage broker to find out the best options for your situation. It is also likely that you will need approval from your IP before you can take on any new debt.

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

It is recommended that you declare your IVA on your mortgage application. If you don’t, your mortgage lender will see it on your credit report anyway.

If you declaring your IVA on your mortgage application, it shows the mortgage lender that you are responsible. It may increase the chances of your mortgage application being successful. If not, the lender may rightly wonder why you chose not to disclose it and may ultimately consider you a higher risk.

Once your IVA has been cleared from your credit record, you no longer have to declare it when applying for credit.

How long does an IVA stay on my credit report?

An IVA stays on your credit record for as long as it is active, which is usually five to six years. Once you clear your debts, the IVA will be erased from your report, and you can start rebuilding your credit rating.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »