Getting a mortgage when you have an Individual Voluntary Arrangement (IVA) on your record can be tricky, but it’s not impossible. While it might complicate things, it doesn’t mean homeownership is off the table forever.
The key is understanding how your IVA impacts your application and making informed decisions along the way. In this blog, we give you everything you need to know.
An IVA is a legal agreement between you and your creditors to pay back your debts. A payment plan is created for you to pay back what you can afford over a fixed period.
It’s a form of insolvency (when you can’t pay off debts in full or on time) and gets added to your credit file as soon as it’s in place. Any lender checking your credit report will see this, which can make them wary of offering you credit—including a mortgage.
Lenders may see an IVA as a sign that you’ve struggled with debt in the past, making them less likely to approve your application.
An IVA stays on your credit file for six years from the date it’s registered—no exceptions. After this period, it automatically disappears. You can regularly check your credit file for free through services like CredAbility.
Credit scores are updated frequently. While it can be challenging to make big improvements during an IVA, the impact of an IVA lessens over time. Managing your finances responsibly will also help improve your score as your IVA ages.
Positive financial habits, such as staying on top of bills and avoiding new debt, can improve your credit score over time. During and after your IVA, focus on rebuilding your credit to improve your chances of securing a mortgage. For tips, check out our guide on how to improve your credit score here.
Technically, yes—but it’s unlikely. Most IVAs include a clause that you can’t take out more than £500 in credit without permission, and a mortgage is far more than that. So, you’d first need the approval of the Insolvency Practitioner (IP) dealing with your IVA.
If you’re considering applying for a mortgage during your IVA, you’ll need to show you can afford it. This could be proving that your mortgage repayments would be cheaper than your current rent. If your IP agrees, you'll then have to find a specialist lender who’s willing to offer you a mortgage.
If you’re thinking about buying your first home while in an IVA, it could slightly improve your chances if you can show that homeownership would reduce your monthly outgoings. However, this is still no guarantee of approval from your IP or a mortgage lender.
The reality is that while you’re in an IVA, it can be difficult to get finance. And your focus will likely need to be on repaying your debts, rather than saving for a deposit or securing a mortgage.
Your best option, if possible, is to hold off on applying for a mortgage until your IVA has completed. If you can, wait until your IVA no longer shows up on your credit report – this will be six years after it was initially registered. Here’s why:[JH1]
1. Higher chance of getting approved
Your chances improve significantly if you wait until your IVA is at least three years behind you and you've worked on rebuilding your credit score.
2. Better interest rates
Your credit history has a huge impact on the interest rates you’ll be offered. If you’ve used the time during your IVA to improve your credit score, you’re more likely to qualify for more competitive mortgage rates. However, it can take time for your credit score to recover from an IVA, so your options may not improve as quickly as you’d like.
3. More spare cash available
While an IVA is in place, most of your disposable income will be used to repay your creditors, making it difficult to save for a deposit. However, once your IVA is completed, you’ll have the chance to focus on building up savings.
3. Greater choice of lenders
Once your IVA is wiped from your credit file, you may have more options, with access to a wider range of mortgage deals, and potentially better terms. It’s worth noting however, that your eligibility won’t improve overnight once your IVA has completed.
More recently there has been an increase in niche mortgage lenders catering to people with IVAs or previous insolvencies. These lenders often specialise in helping people with bad credit or a history of financial difficulties.
While the rates may be higher, you could explore this option if you’re eager to get on the property ladder. However, it’s important to take advice from a mortgage broker who understands these kinds of products. They would make sure you're getting the right deal for your situation.
If buying a home during or soon after an IVA isn’t an option, there are schemes available that might help you plan for the future:
Again, remember to reach out to a qualified mortgage adviser to get financial advice for your individual circumstances and needs.
If you’re in debt and feeling overwhelmed, there’s help available. Charities like StepChange, National Debtline, and Citizens Advice offer free, impartial advice and support. Don’t hesitate to reach out to them for help navigating your finances, whether you’re in an IVA or not.
Disclaimer: We make every effort to ensure that content is correct at the time of publication. Please note that information published on this website does not constitute financial advice, and we aren’t responsible for the content of any external sites.
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
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