Remortgage to Pay Off an IVA

A lot of the time, when you have an IVA, a lot of lenders won’t consider you for a mortgage or a remortgage. But when you deal with a mortgage broker, they have a wider range of products and companies and can often find options for you. There are still questions about affordability, income and the property but it is possible to remortgage to pay off an IVA.

Do lenders consider remortgages on IVAs?

There are companies that will consider you for a remortgage when you have an IVA. They will need to go through all the normal information required for a mortgage and also look at the IVA. They will want to know the date of registration, size of the debt, date of the settlement if it is finished and what shows on your credit record.

You will need to have made regular requirement payments for the IVA for most lenders to consider you. And there may be a higher interest rate involved.

How soon can I get a remortgage after an IVA?

For some lenders, it is a flat ‘no’ if you have had an IVA, whether it is finished or not. Others require it to have been settled for a certain period of time, usually three years. However, if you plan to use the remortgage to pay off the IVA, then there are lenders who can help.

The more recent the IVA, the trickier it can be to get a mortgage. You may face a higher interest rate or need to have a bigger deposit or more equity in the house. Also, the amount they are willing to lend is often lower.

How to remortgage with an IVA

It is important to take a look at your credit score and file before you start. Some lenders recommend different credit reference agencies. It is worth knowing that creditors are only required to report information about your account with them to 2 out of the 3 agencies so it is worth looking at least two for any problems. In fact, checking all three can be the safest bet as if you provide a clean record from one agency then the lender finds problems from another, they can decline the mortgage entirely.

Once you have copies of your files then you can speak to your mortgage broker about what to do next. They will go through the normal affordability tests to see what kind of mortgage you can afford and then start to approach lenders they know will consider you.

IVA impact on credit

An IVA is taken as an alternative to bankruptcy and this usually means there have been some financial issues in the lead-up. It is also a way to avoid repossession of the house. This means there could be defaults, CCJs and debt management plans in your history. Lenders will want to know why this happened and what went wrong to help assess the likelihood of it happening again. This will play a part in if they accept you or what terms they apply to the mortgage.

Mortgage after an IVA, but partner has good credit?

An IVA is a kind of debt management solution that can help you to take back control of your spending. It is seen as a preferable option to bankruptcy for both creditor and debtor. It’s also easier to mend your credit report after you have cleared an IVA. Securing a mortgage after an IVA might be a little more difficult, but it is in no way impossible. Just because one lender has said no, it doesn't mean that all lenders will say no.

An IVA will stay on your credit report for six years, regardless of how long your agreement is. So, if your agreement is five years long, the IVA will still be on your report for 12 months after completion. After this, it will drop from your credit report and you can begin to build your credit score again. If you would like to take out a mortgage in this time, it may be possible to do so if your partner has good credit.

Your credit score is just one factor that lenders will look at when making a mortgage decision. In some cases, a lender will immediately reject you if you have an IVA on your record, even if you have successfully completed. Others will look at your entire profile, including evidence of earnings and the size of your deposit. You should always shop around for a lender that will work with individuals with an IVA. Your partner’s good credit score may even be enough to allow them to secure a mortgage on their own.

Remortgage after IVA

Remortgaging after an IVA

After you enter into an Individual Voluntary Arrangement, there are a couple of reasons why you might want to try and remortgage your home.

Firstly, it could be that you’ve completed your IVA and it’s dropped off your credit file (6 years from the point it began) and you want to either upsize to a family home or downsize to a smaller property and release some of the equity in your home in the process.

Or…

You might be trying to remortgage to raise a lump to sum to actually pay off part or all of your IVA. This is sometimes allowed by your Insolvency Practitioner (IP), if it’s felt that it’s best both you and your creditors.

In both cases, you’ll more than likely have to turn to the specialist lenders to facilitate your remortgage needs. If you apply to one of the high street banks in the standard way, you’re not going to have much luck in getting your application accepted.

Specialist lenders

Whatever your plans, your remortgage is going to have to be shown to be affordable to you and you’ll need to prove your income. Obviously, if you’re still in your IVA, this does complicate the issue and the rates you’re offered are going to reflect the situation you’re in.

In most cases, you will be remortgaging after your IVA has fallen off of your credit file, once it has been settled and expunged. In this situation, your credit rating will probably still be low and you’ll be looking at ways to improve it and increase your chances of being accepted.

The specialist lenders we mentioned before are the ones that a) will be much more forgiving in taking more than just your rating into account and b) are going to have access to the deals that cater for people with circumstances likes these.

For information on applying for a mortgage in this situation, take a look at our IVA mortgage page.

The criteria

When you remortgage, there will still be certain criteria that need to meet in order to be considered, irrespective of your own, personal financial status. Such as:

The amount secured against your home should not exceed 85% of its loan to value
The amount of equity released should not exceed the total quantity of unsecured debt
The length of the new remortgage terms should not go beyond the applicant’s retirement age
A minimum of £5,000 must be released in the process of the remortgage

There are occasions when a remortgage whilst still in an IVA only pays off part of the outstanding debt. In this instance, the increase in mortgage payments will usually be reduced from the monthly cost of the IVA.

If you want to find out more about increasing your credit score after an IVA, take a read through our IVA credit file cleanup page. Alternatively, you can speak to one of our recommended mortgage brokers about the options available to you.

Will it affect getting a mortgage in the future if we sell and rent now after completing IVA early?

Contrary to popular belief, there is no way to remove an IVA from your file quicker. This means that even if you complete your IVA early, it will still have to remain on your file for six years. There is no getting around the fact that your IVA will be on your credit score for six years, so selling your home and moving to rented accommodation can have future implications for getting a mortgage.

The first thing to consider is that an IVA will be visible on your credit file when you move to private rented accommodation. Some landlords and letting agents look at credit scores as part of their reference checks. They might choose not to rent to someone with an IVA for fear of missing out on rent.

When it comes to purchasing a home again, securing a mortgage might be more difficult. Some lenders will automatically rule out borrowers if they have an IVA on their credit report. Others might be more inclined to lend to you, but you may need to provide a larger deposit to reduce the risk to the lender.

If you do decide to sell your property and rent, it might be easier to wait until the IVA has been removed from your record before you apply for another mortgage. During this time, you can start to rebuild your credit score through responsible borrowing. It’s important that you only borrow from responsible lenders as some will target people with IVAs in order to sell them more expensive lines of credit.

Joint mortgage after finishing IVA?

Getting a mortgage after completing an IVA can be more difficult but it isn’t impossible. If your partner has a strong credit report, this might be just the thing needed to assure mortgage providers that you are a reliable borrower.

An IVA is a legal agreement between you and your creditors to freeze interest and pay back what you owe over a fixed period of time. During this time, you will not be able to take on any new debt and will have to stick to the terms of the agreement. As it is an Individual Voluntary Agreement, these cannot be combined between two people, such as a couple. This means that if only one person has an IVA and you are thinking about getting a joint mortgage, it might not be as impossible as you first thought.

Time heals all when it comes to credit reports. The IVA will only be visible on your record for six years. If your IVA lasts for five years, it will still be visible on your credit report for 12 months after you have received your IVA Completion Certificate. In many cases, you can simply wait until after the IVA has dropped from your credit report and then begin building your credit score again.

If you are keen to get a joint mortgage sooner, there are steps you can take to make this more likely. If your partner is able to afford the mortgage on their own, the simplest step may be to simply have them submit the application. If you would both like to be listed on the mortgage, you can approach niche mortgage providers who specialise in mortgages for people with adverse credit. Securing a larger deposit can also help to increase your chances of being able to acquire a mortgage.

Is it impossible to obtain a mortgage until 6 years after IVA finish date?

An IVA is an abbreviation for an Individual Voluntary Arrangement. This is a legally binding agreement with your debtors to pay back a portion of your debts over a fixed period, usually five years. An IVA is often a better solution for the debtor and creditor as it is an alternative to bankruptcy.

A record of your IVA will remain on your credit report for six years, and this can have an impact on your ability to take on further debt, including a mortgage. Even if the debt it affordable with your current circumstances, the presence of an IVA can make some lenders concerned about your ability to pay back debts on time.

The IVA will be visible on your credit report for six years, so this could be a further 12 months after you have received your IVA Completion Certificate. In many cases, it is best to wait until the IVA has dropped from your credit report before trying to secure a mortgage. However, there are some instances where you could secure a mortgage before the IVA has gone from your record.

Not all lenders approach this issue in the same way. Some lenders will automatically rule out an applicant with an IVA, while others will consider them if they can provide a bigger deposit, for example. If you are determined to secure a mortgage with an IVA on your record, the first step should be to look at your credit report across all three credit reference agencies.

These are Callcredit, Experian and Equifax. Once you have a clear view of your position, you can approach niche mortgage providers to see if any of them will consider your application.

Getting a mortgage after completing IVA?

Getting a mortgage after completing an IVA may be more difficult, but it is not impossible. An Individual Voluntary Agreement (IVA) is a way of managing your debt and is a legal agreement between you and your debtors, usually with the help of an insolvency practitioner. An IVA will stay on your credit report for six years. If your IVA is a five-year arrangement, this will mean that it will stay on your record for one year after completion.

Getting a mortgage with an IVA or remortgage with an IVA, still on your credit report is more difficult. You will need to approach a niche mortgage advisor and you may need to supply a bigger deposit. If you have an IVA on your credit report and you are rejected for a mortgage, don’t assume this means that all mortgage providers will reject you. Sometimes, you just have to find the right lender.

In many cases, it is best to wait until the IVA has dropped from your credit report before getting a mortgage. This is because you are more likely to be offered a better interest rate. With the IVA removed from your credit report, you will be able to rebuild your credit and give lenders confidence in your ability to pay back your mortgage.

Rebuilding your credit report after an IVA is difficult but not impossible. The first step is to get a clear understanding of your position. You can do this by signing up to view your credit report with the three main credit checking agencies. These are Equifax, Experian and Callcredit.

Can you get a mortgage after the IVA?

An IVA, otherwise known as an Individual Voluntary Agreement is a legally binding agreement between you and your debtors. IVAs are often drawn up to help people pay off their debts and wipe the slate clean. An IVA will last for six years and will appear on your credit report. As a result, you won’t be able to take on any further debt for the duration of the IVA.

IVAs differ from CCJs are they are voluntary. A CCJ is the result of your debtors taking you to court. People choose to enter into IVAs for a number of reasons, but taking control of their debt is the top reason. If your debts become unaffordable, an IVA can help you to take back control of your life and learn to live within a strict budget.

Even if you pay off the IVA early, it will still remain on your credit report for the same amount of time. Most IVAs last for five years and the IVA will remain on your credit report for 12 months after you have received your IVA Completion Certificate.

For those keen to get on the property ladder, an IVA might make things more difficult, but it is not impossible. There are steps you can take to secure a mortgage with an IVA on your file. Alternatively, you can simply wait until the IVA has dropped from your credit report and begin building your credit up.

Can I get a mortgage with an IVA?

Lenders will look at your credit report as part of the mortgage application. An IVA, CCJ or default on your file can make you less attractive to a mortgage provider. This is because they are looking at the risk associated with lending to you. People with adverse credit history are considered high risk. Even if you have taken control of your spending and changed your ways, an IVA can still impact a lending decision.

While one bank might turn you down for a mortgage after an IVA, another bank might accept your application. There are specialist lenders that work with people with poor credit. They might ask for a larger deposit or offer a higher rate of interest, but if getting on the property ladder is important to you, this might be worth it.

How long should I wait before applying?

An IVA will stay on your credit report for six years. After it has dropped from your report, you might notice that your credit score is still low. This is because you will have a six-year period where you have not shown any evidence of being able to pay back debts. It’s very difficult to secure credit with an IVA, so you will essentially be starting from scratch when the IVA is complete.

The best option for those with an IVA wanting to secure a mortgage is to wait until the IVA has been removed from their credit report and then taking steps to improve your credit score. This will make it easier to secure a better rate on your mortgage. Once the IVA is gone from your report, you will be treated like any other lender.

How do I improve my credit after an IVA?

Once the IVA is gone, you can focus on rebuilding your credit. To start with, you should sign up for the three credit reference agencies Equifax, Experian and Callcredit. This will allow you to see what lenders see and fix any issues with your report.

After this, you should look at responsible and affordable lending to start building a track record of making payments on time. Beware of irresponsible lenders that will focus on people with adverse credit history. They might offer large lines of credit at a high rate of interest which can be problematic if payments are missed. Instead, look for specialist credit cards with low limits to help you build your credit.

Securing a mortgage in principle

You can start the mortgage process off by securing a mortgage in principle. This is a kind of pre-qualified application that will give you an indication of how much you can expect to borrow. If you have recently completed an IVA and are building your credit score, you can start the house hunt with just a mortgage in principle. Once you have chosen a property, you can put in an offer and then the bank will process your full application. This can buy you an extra couple of months to build your credit score.

Always shop around

Rejection by one lender does not mean that all lenders will reject you. Shop around and speak to specialist mortgage brokers who will be able to advise you on the best course of action. Time heals most issues with your credit report, so if you can wait it out, you can be confident you will be treated like any other borrower and won’t need to worry about your adverse credit history anymore.

The Importance of Checking Your Creditor Default Dates

Once you’ve settled your IVA, been discharged from bankruptcy or simply completed your debt management plan….you’ve made it, so congratulations are in order! The hard work of paying back the money you owe is over and you can look forward to a more prosperous and financially stable future.

However, before you get too carried away, there are still some things you need to do in order to help your credit status recovers as quickly as it should. One of those things is checking that your credit file reflects your new debt free status, as it doesn’t always get communicated to all three of the UK’s credit reference agencies Experian, Equifax and Noddle (Call Credit).

What will tend to happen is that when you settle your debt with a creditor, that creditor will inform just one of them and not the other two. Creditors aren’t obliged to inform all three, so it’s down to you, the debtor, to ensure this new state of affairs has been communicated to all of them.

Credit Controller

With any company that you might owe money to, delinquent accounts are the responsibility of the credit controller, so this is the person that you need to report incorrect information to about you or specific default dates. Should your defaults be showing as later than the start of your IVA or bankruptcy, then this needs to be rectified as soon as possible. Typically, your IVA or bankruptcy will be on your credit file 6 years from the date it started. Applying for a mortgage or other types of credit is going to be curtailed if your file is still incorrectly showing as having active defaults after the agreed date.

Write, Don’t Phone

When you do contact the offending creditor, it’s recommended that you do it in writing and you address it to the aforementioned credit controller. If you phone it in, they’ll likely just ask you to write in and if you call the credit reference agency, they’ll tell you to do the same. Save yourself time and stress by writing first. Using an IVA as an example the letter can be wording like the bellow;

re: [account/reference xxxxxxxxxxxxxxx]

I started an Individual Voluntary Arrangement (IVA) on dd/mm/yyyy. You can confirm this by checking the Insolvency Register at https://www.insolvencydirect.bis.gov.uk/eiir/.

I am writing to ask you to correct my credit file for [details of your debt with the creditor, including the account number or reference number]. This debt is included in my IVA.

At the moment [there is no default date shown / the default date is shown as dd/mm/yyyy]. This is incorrect and a breach of the Information Commissioner’s Office guidelines and the Data Protection Act 1998. There should be a default date not later than the start date of my IVA.

Please correct this entry within 28 days or supply me with a written reason why you will not do so.

We’d also recommend that you keep a copy of this letter for your own records, just in case it gets lost in the post! It doesn’t cost that much more to get the letter signed for on delivery, so if you want to make sure your creditor definitely gets it, recorded delivery might be an idea.

In Conclusion

Verifying that the credit reference agencies all have the right information on you is an important job which often gets overlooked. If more people knew the impact of not doing it, then it probably wouldn’t get forgotten as much as it does. At Niche Mortgage Info, we are dedicated to ensuring that people get the information and assistance they need to get on with their lives after financial issues.

For more information on this and all matters relating to getting a mortgage after all types of bad credit, take a look through our website www.nichemortgageinfo.co.uk.

Thanks so much for reading our blog and we’ll see you next time.