Bad credit incidents and competitively priced, low deposit deals seldom go hand in hand if you approach the high street lenders. Before the banking crisis and subsequent economic collapse, the banks and building societies were quite relaxed in with their own lending.
This carefree attitude resulted in a growth in ‘sub-prime’ financing – expanding credit to individuals with a bad credit record, often at inflated interest rates. This was regarded as among the top causes of this financial crash. Understandably, the banks and building societies are now far more careful about who they release funds to, and just how much they will offer.
It has made it more tough to acquire a more competitively priced mortgage with an IVA or another bad credit event on your credit history.
So what is an IVA?
It is an Individual Voluntary Arrangement which is a legally binding agreement between an individual and their creditor. It has to be set up by an insolvency practitioner, who is a professional a solicitor or accountant, and accepted by the court. The IVA will be listed on the Insolvency Register.
It is the work of the insolvency practitioner to evaluate your finances and allow you to think of a fair payment plan you can realistically manage, and your creditors will likely take. The insolvency practitioner will function as an intermediary and manage your creditors on your own behalf for the duration of the IVA – normally five years. They will always charge a fee for this service.
When the proposal has been approved by your creditors, all of interest and fees will be suspended and creditors will banned from requiring further payments from you. You’ll pay the agreed monthly payment to the bankruptcy practitioner, who will deduct their fee and then forward the rest of the money to each creditor.
After the time period the IVA was put up for has passed, and given that you’ve kept up with all the obligations, any debt which was not paid off within the duration of the agreement ought to be written off. This means you no longer owe these creditors any money.
Ultimately, the listing of the IVA will be removed from the Insolvency Register.
Is it possible to get a mortgage if I have an IVA?
Seeking out a competitively priced mortgage while having an IVA can pose a few issues and, realistically, it’s very likely to charge you more than if your credit history had a clean bill of health. But, there is absolutely no obstacle as to why somebody with an IVA can’t apply for a mortgage, and you will find specialist lenders out there who are going to have the ability to help secure the most favourable deal possible.
The issues you may encounter when seeking to acquire an IVA mortgage are caused by the effect the IVA has on your credit score. All mortgage lenders take out credit ratings into account to help them evaluate the risks involved with their underwriting. Most mainstream mortgage lenders will decline a mortgage when they find an active IVA in your own credit file.
Luckily, there are a number of bad credit lenders who are ready to provide mortgages to individuals with an IVA, but higher interest rates can apply along with larger deposited being required. Therefore, there are lenders out there who will consider applicants who have an IVA. However, remember that every application will be evaluated on a case by case basis on its individual merits.
How long can an IVA last on your credit file?
An IVA will be displayed in your credit file normally for six years from the day it begins. This implies that if your IVA has lasted for a period of five years, you will still need 12 months to go before it’s removed from your credit report. After the six years are up, and so long as you stuck to the IVA agreement with no missed payments or additional defaults, then your credit history ought to be clean.
The caveat, however, is that faced with a clean credit report, lenders will normally inquire whether any agreements for example IVAs have been entered into. If the answer is yes (and you ought to be honest about these matters ), they’ll probably still decline your application though the IVA is no more on either the credit file or the insolvency register.
Another issue to keep in mind is that a clean credit report is not always a good credit record, as basically you’re beginning from scratch. You don’t have any payment history to reveal whether you’re a good risk, and will now have to rebuild your credit score to present an appealing proposal to creditors. There are a range of things that you can do to fix your credit rating, however, your starting point must be to get your credit rating from a credit rating agency.
Alternatively, get in contact with our team now and we can assist you in obtaining a copy of your credit report.
What to Search for in your credit report
Credit reports extend back six years, so in theory, after your IVA has passed by, your report ought to be clean. But, it’s important that you check all of the details are right. Ensure that your address and name are registered correctly and any errors on your credit report are adjusted. It’s also advisable to check there’s not any adverse credit record after the beginning date of your IVA.
What next?
If you’re trying to find a mortgage with IVA, Finbud mortgage brokers can endeavour to help. Our committed bad credit mortgage team works with a range of specialist lenders across the united kingdom, and we all know just where to turn to discover the best deal to satisfy your specific financial condition. With unlimited access to this current market, we provide exclusive rates unavailable on the high street. In addition, we offer you free advice.
If you have an IVA and want to know if you can get a bad credit mortgage, Please get in touch with one of our mortgage brokers. We would love to help you!
Frequently asked questions
How long can the IVA last?
An IVA normally lasts for five years. After the five years have passed, and given you’ve made all payments as agreed, any remaining outstanding debt could be written off. If that is the case for your specific situation you may no longer owe anything to those creditors/lenders.
The IVA will be listed on the Insolvency Register and in your own credit file. It can be removed from the Insolvency Register after five years are up, but will stay on your credit record for six years.
Can I still get a mortgage if I have an IVA?
Yes, though your choices will be restricted.
Whenever you apply for credit the lending institution will conduct a credit check, so they will see that you have an IVA. At this point many creditors will decline your application
Fortunately there are specialist lenders that will not be put off by this. But, the ones that are prepared to offer you a mortgage will expect one to place down a bigger deposit, normally a minimum of 25 percent. They will also charge more with respect to interest rate and charges.
In the event the conditions available maybe still makes it a viable for you, an expert mortgage broker will have the ability to give assistance and advice so you get the best deal possible.
How does one get an IVA in the first place?
Your Insolvency specialist should explain all options to you personally and may submit an application for an interim order to keep creditors taking any action against you as the IVA is being set up. After an overview of your financial situation, your proposal will likely be put forward to the creditors. If enough consent, then this may be reported to the courts together with the IVA subsequently binding to all creditors.
