Can I get a mortgage when in an IVA?
Under the terms of your IVA you will need the support of your Insolvency practitioner (IP) if you want to obtain a mortgage.
But, technically, there are no reasons why someone with an IVA can't apply for a mortgage if your IP agrees.
However, there are several practical issues that will make obtaining a mortgage quite challenging.
Practical Problems To Overcome
Each of the following points have the potential to scupper any plans of obtain a mortgage if you are in an IVA.
And the implications of each should be considered carefully before any decision is made.
Your credit rating
Problems will be caused by the adverse effect your IVA has had on your credit rating.
It's standard practice for mortgage lenders to undertake credit checks to help them determine whether a new customer poses a lending risk.
Typically, high street mortgage lenders are extremely sensitive to accepting risks.
Which is why if you apply for a mortgage with one of the high street lenders whilst in an IVA, it's likely you'll fail their credit checks and they'll reject your mortgage application.
But some mortgage lenders specialise in providing mortgages to people in an IVA.
These mortgage lenders are often referred to as subprime lenders
Subprime lenders interest rates are usually higher than the main mortgage lenders, and deposit can be larger, too.
But because the specialise in lending to IVA clients, it is possible to obtain a mortgage.
The IVA windfall clause
There are also issues relating to the IVA's terms and conditions that make obtaining a property problematic.
Acquiring an asset
If you're in an IVA and you acquire an asset, such as ownership or part ownership of a property, your IP will need to be informed.
The implications of acquiring ownership of a large asset midway through an IVA can be serious and you should give them careful consideration.
Obtaining a share of the equity in a property is known as obtaining an 'after acquired asset' and, as such, could trigger your IVA's 'Windfall Clause'.
Which is why its advisable to seek independent legal advice before you commit yourself to buying a property during your IVA.
This is the best way to avoid any unforeseen or unintended consequences.
Gifted deposits
If you intend to purchase a property using a deposit provided by a 3rd party, then you need to take care that their deposit doesn't trigger your IVA's windfall clause, too.
Which is why its advisable to seek independent legal advice on how best to protect the interests of any 3rd party that may want to 'gift' the deposit to you whilst you are in an IVA.
Again, this is the best way to avoid any unforeseen or unintended consequences.
