Echo Finance

Getting a mortgage after an IVA

One of the most frequently asked questions people ask about IVAs is how will it affect their chances of getting a mortgage in future.  Below we look at whether getting a mortgage after an IVA is a possibility and how other debt solutions may also affect future lending.

Can I get a mortgage after an IVA?

You will be able to get a mortgage after an IVA but you are unlikely to be able to get one until the IVA drops off your credit file. It will do so six years after your IVA was agreed or upon completion if your IVA takes longer than six years. Once it has been removed from your credit file, your chances of getting a mortgage will increase. However, lenders may ask whether you have ever been subject to an IVA which may affect their decision whether to lend to you and on what terms. We do recommend once your IVA has finished, you start to improve your credit rating.

Saving for a mortgage deposit

One issue you might have when considering mortgages is the deposit. Even if you opted for a mortgage in which you borrowed 95% of the property you will still have to save the 5% deposit. Chances are that when you were in an IVA you couldn’t put any savings aside and unless you have friends or family willing to lend you the money, you will have to start from scratch raising money for your mortgage deposit.

Whilst you were in an IVA you would have needed to complete an income and expenditure to show how much you could afford to pay back to your creditors after you had paid all your household bills. You could use this budget to help you save for a mortgage. As your IVA is completed, you could use the extra funds you now have to deposit into a savings account.

How will other debt solutions affect my chances of getting a mortgage?

While an IVA is recorded on your credit record for six years from the date it was agreed, or until it is completed should it take longer than six years to complete, this is not unusual and other debt solutions will also have an impact your credit rating.

As a debt management plan (DMP) is an informal solution, defaults could be added to your credit file at any time during your plan. A default will then stay on your record for six years. Defaults on your credit file will lower your credit score and affect your chances of getting a mortgage. Bankruptcy will also stay on your credit file for six years.  Once they have been removed from your credit file however and you start to rebuild your credit score, your chances of getting a mortgage will increase. However, lenders may ask whether you have ever been subject to Bankruptcy which may affect their decision whether to lend to you and on what terms. 

Most debt solutions will impact your credit score while you are in them – if you’ve been missing or making reduced payments before entering into a debt solution your credit score will have been affected anyway – but after a certain time period they will be removed from your credit reference file and your chances of getting a mortgage will increase.

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
Echo Finance

Registered in England and Wales No. 6939070. Registered office - The 1812 Building, Wheatley Park, Mirfield, West Yorkshire, WF14 8HE. Echo Finance Limited is authorised and regulated by the Financial Conduct Authority. Echo Finance Limited is entered on the FCA register (www.fca.org.uk) under reference 570073. The Guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. The Financial Conduct Authority does not regulate Will Writing, Estate Planning and some forms of Mortgages. © Copyright Echo Finance Limited. Where you have a complaint or dispute with us and we are unable to resolve this to your satisfaction then we are obliged to offer you the Financial Ombudsman Service to help resolve this. Please see the following link for further details: www.financial-ombudsman.org.uk.

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