An Individual Voluntary Arrangement (IVA) can be a good answer if you have debt problems. An IVA permits you to repay your obligations over a certain period of time and is a formal contract between you and your creditors. Although an IVA can offer much-needed debt relief, it may also affect your ability to obtain a mortgage. We’ll look at whether it’s possible to secure a mortgage with an IVA in this piece, as well as what you should know and what you can do to improve your chances.
What Is IVA?
Individual Voluntary Arrangement (IVA) is a written agreement to repay debts over a specific time period between a person and their creditors. An insolvency practitioner, who assists in creating and administrating the agreement, is in charge of the legal process.
Regular payments from the debtor are made into the IVA, which are subsequently divided among the creditors. Normally, the payments are spread out over five or six years, though this can change depending on the individual’s circumstances.
One of the main benefits of an IVA is that it can prevent creditors from seizing the debtor’s assets, such as their home or car. As the debtor’s monthly payments are determined by what they can afford rather than by how much they owe, it offers a more cost-effective way to pay off debts.
How Does an IVA Affect Mortgage Application?
Although an IVA may affect your ability to obtain a mortgage, it does not guarantee that you won’t be able to do so. Lenders will evaluate your mortgage application based on your credit history, income, and outgoings, among other things.
IVAs can significantly impact your mortgage application by making it more challenging to get accepted. IVAs are sometimes seen negatively by lenders since they show that you’ve previously had trouble paying off your debts. This may make it more difficult for you to obtain a mortgage and may lead to offers of less favorable conditions or higher interest rates.
Even if you can get a mortgage with an IVA, you could find that your alternatives are limited. Some lenders might be unwilling to lend to you at all, while others might only be willing to provide you with a mortgage that is smaller than what you would typically be qualified for. Additionally, you might be required to make a larger deposit or provide additional security, such as a guarantor.
How to Get a Mortgage with an IVA?
IVAs can make getting a mortgage difficult but not impossible. You can do the following actions to improve your chances of success:
- Hold Off Till Your IVA Is Finished: One of the most crucial things you can do is to hold off on applying for a mortgage until your IVA is finished. This will offer you some time to improve your credit score and show potential lenders that you can now handle your money well.
- Consult a Knowledgeable Mortgage Advisor: It can be quite beneficial to work with a specialized mortgage advisor who has experience assisting clients with IVAs. They can guide you through the application process and advise you on which lenders are more likely to accept your application.
- Save a Bigger Down Payment: Getting a mortgage with an IVA can be simpler if you can save a bigger down payment. This is because putting down a higher amount of money lowers your borrowing requirements, which could make you more appealing to lenders.
- Boost Your Credit Score: Lenders will consider your credit score when evaluating your mortgage application. You might have a better chance of getting a mortgage if you can raise your credit score by making on-time payments on all of your accounts and avoiding missed ones.
- Consider Getting a Guarantor Mortgage: If you’re having trouble getting a mortgage authorized alone, you might want to consider getting a guarantor mortgage. When a family member or friend guarantees the mortgage payments, your chances of getting accepted may be improved.
Alternative Lending Options:
There are a few other lending options you might take into account if you have an IVA and are having trouble getting a mortgage from a traditional lender:
- Specialist Lenders: These lenders specialize in offering mortgages to borrowers with bad credit records, such as those with IVAs. When evaluating your application, these lenders might be more accommodating than traditional lenders, but you might have to deal with higher interest rates and costs.
- Bridging Financing: A short-term loan that can be utilized to cover the financial gap between buying a new home and selling an existing one is known as bridging financing. If you are in an IVA, you might be able to purchase a new home using bridging financing while you wait for your IVA to be finished.
- Shared Ownership: Shared ownership is a government-backed program that permits you to purchase a portion of a property and pay rent on the unpurchased portion. If you can’t afford to buy a house outright, this is an excellent alternative that can be easier to get if you have an IVA.
- Buy-to-Let Mortgages: If you have an IVA and cannot obtain a home mortgage, you might be eligible to obtain a mortgage for rental properties. This is the process of buying a home and renting it to tenants. Even though buy-to-let mortgages can be more expensive than residential mortgages, if you have an IVA, they might be simpler to get.
- Family Support: If you have willing and able family members, you might be able to borrow money from them to help you purchase a home. If you cannot obtain a mortgage from a reputable lender, this may be an excellent alternative.
Final Words:
In conclusion, obtaining mortgage approval despite having an IVA can be difficult but not impossible. Your chances of success can be increased by delaying until your IVA is over, consulting with a specialized mortgage counselor, setting aside a larger down payment, raising your credit score, and looking into alternative lending options. You should exercise patience, conduct a thorough study, and seek expert guidance to aid you through the application process. By following these procedures, you might be able to locate a lender that would grant you a mortgage on advantageous conditions, enabling you to realize your ambition of becoming a homeowner despite having an IVA.
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