The Question ….

I’ve not had the best credit in the past and actually had an IVA in place until recently. I’ve now cleared the IVA, but now I want to look at buying my first property. Is that IVA going to affect my chances of getting a mortgage?
— Brad from Leigh on Sea

The Answer ….

Hi Brad, Thank you for your question. We will try and provide a bit of background to our audience on IVA’s and what they are, before hopefully moving on to some things to consider when looking at trying to obtain your first mortgage.

Buying a Property with a Poor or Bad Credit History

Buying or selling a home is considered to be more stressful than having children, changing jobs and getting married – according to a survey from Which?. Applying for a mortgage in particular was considered to be the most stressful part of the process, as individuals scour the market to find the best deals available. For those who have experienced financial difficulty or don’t have the cleanest credit file, this feeling of stress is accentuated. It is not surprising then when looking at debt solutions, people were most concerned about the long term implications on their credit file.

So what is an IVA or Individual Voluntary Arrangement?

Individual Voluntary Arrangements (IVAs) are a popular debt solution that allow people to clear their debts in a set period of time.

According to PayPlan one of the most common questions they get asked by people considering an IVA is “Will I be able to get a mortgage afterwards?”. The short answer is YES. Like most debt solutions, you will be able to secure a mortgage, but you will need to wait until the IVA has dropped off your credit report as it is unlikely lenders will consider you while you are still making repayments.

IVAs are removed from a credit report six years from the day they are approved, or after it has been completed should it last longer than six years, and you are unable to take on any further credit while completing them. Therefore, once your debts are written off, you can begin work on improving credit score and working towards improved financial stability.

How to improve your chances of getting a Mortgage ONCE you have completed your IVA

Once your IVA has been settled and it has been removed from your credit report, it’s time to start building up your credit score again. Once your IVA has been removed, your credit file will be clear and you will have a clean slate. Unfortunately mortgage lenders want to see you can handle credit responsibly so you should begin taking on small amounts of credit and repaying the full amount that you owe regularly.

Checkmyfile.com - The UK's only multi agency credit report and checking company
Quite often you will want to check your credit report and your credit history before applying for a mortgage, loan or credit card. There are 3 major credit reference agencies in the UK. These are Experian, Equifax and Callcredit. Checkmyfile.com have access to all of these credit agencies and their data. They will produce one multi agency report for you. Checkmyfile.com are the only company in the UK offering multi agency credit reports.Checkmyfile.com - The UK's only multi agency credit report and credit history reporting company

A Low Interest Credit Card

A low interest credit card is ideal for this: you can use it to cover everyday expenses such as fuel and then settle the amount owed immediately at the end of the month once you have been paid.

A Savings Account

A savings account is another good way of improving your chances of obtaining a mortgage after an IVA. You will of course need a deposit to purchase a property, so the larger your deposit is, the greater the likelihood of being accepted by a lender. 10% is the minimum expected if you aren’t using a Help to Buy service, so set a budget before you start. Work towards saving a deposit, plus a little more – you’ll need at least an extra £2,000 – £3,000 for conveyancing fees.

You should be looking to save a deposit for your first property, of at least 10% of the purchase price. The larger your deposit, the greater the chance of being accepted by a lender for a first time buyer mortgage

It is possible to obtain a mortgage after an IVA – just be sure you notify the lender if they ask if you have ever had one, and work on improving your credit score as soon as the IVA has been lifted from your report. Life can return to normal after debt, and if you have been struggling with debts, taking on an IVA may be the best step towards a brighter financial future.

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