Can I get a mortgage when in an IVA?

Technically, there are no reasons why someone with an IVA can't apply for a mortgage.

But, unfortunately, there are several practical issues that will make obtaining a mortgage very difficult, particularly in the current economic climate.

Practical Problems To Overcome

The problems are caused by the adverse effect that an IVA will have on your credit rating, with both interest rates and deposits being affected.

Only specialist mortgage lenders will be interested in providing a mortgage for someone who's in an IVA. These mortgage lenders are often referred to as subprime lenders.

Your credit rating

It's standard practice for mortgage lenders to undertake credit checks to help them determine whether a new customer poses a credit risk.

If you apply for a mortgage with one of the 'high street' lenders whilst in an IVA, it's likely you'll fall foul of their credit checks and that they'll subsequently refuse to provide you with a mortgage.

But there are some mortgage lenders that specialise in providing mortgages to people with poor credit ratings, such as those in an IVA.

However, they normally require a larger deposits as well as higher interest rates on the mortgage products they offer.

It's therefore really important that you shop around before committing yourself to anything.

The IVA windfall clause

There are also other issues, relating specifically to the IVA's terms and conditions, which need to be considered and then addressed.

Acquiring an asset

If you're in an IVA and you acquire an asset, such as ownership or part ownership of a property, your Insolvency Practitioner (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 the same as obtaining an 'after acquired asset' and, as such, there will be implications related to your IVA's 'Windfall Clause'.

You should seek independent and professional legal advice on how best to proceed before you commit yourself to making the purchase.

Gifted deposits

If you intend to purchase a property using a deposit provided by a 3rd party, such as a partner or family member, then you need to take care that their deposit doesn't trigger your IVA's windfall clause.

You should seek independent and professional legal advice on how best to protect the interests of any 3rd parties that may want to 'gift' the deposit to you.

Apply for an IVA

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