Realistic about obtaining mortgage AFTER IVA

[atomicdev]

Hello,
Long story short – in 2001 I set up an online electronics company and over 3 years I did not register as a company (call it being very naïve and young). I closed the company down in 2004 when HMRC began their investigation and 3 years later they landed me with a tax bill of £18000.
In 2006 I set up another company which I’m still running successfully today (and paying all my tax) and in 2011 the demand from HMRC became very serious so I had no choice but to enter into an IVA in Nov 2011.
At the age of 24 in 2006 I bought my first house where I still reside today. I have been in the IVA for just over 2 years paying back £250 a month. I am now married with a 4th child on the way and my house is only 2 bedrooms so obviously I’ve been very concerned at the length of time this IVA could affect me and my family.
Last week I called my IVA company and they gave me a settlement figure of £10000 to clear the IVA. I have asked them to go ahead and arrange the meeting with creditors to ask them to agree to this. It was really worrying me thinking this IVA could affect me for another 5 years especially with not being able to move house. I am happy to pay the £10k, end the IVA in Feb and receive the completion certificate 6 months later (this has to be better than 5 years!).
I’m not expecting my credit score to go up or high street lenders touch me with a barge pole but I want to be realistic about my chances of obtaining a half decent mortgage in the next year or so. My house is currently in my name but I would like to take out a joint mortgage with my husband. The property is currently worth £120000 with £80000 outstanding so if I sold at this price I’d walk away with approx. £40000 equity and of course use this as deposit for a new property.
We are going to be in a desperate situation within the next 18 months with 4 children in this 2 bedroom home. We will need at least a 3 bed house with enough space for us. I have read online people having to wait a further 6 years, is this seriously true? Can you please advise me if settling this IVA early is going to open any doors for me in the very near future and what companies would look at us if any?
We are both working full time with a joint income of £37000 and I am classed as employed by the limited company. I have had my mortgage for nearly 8 years and never missed a payment. I am currently on 2% above the England base rate. No other adverse credit on my profile, just have a Vanquis cc which I never use.

[luluj]

There are mortgages available ... Best advice is to contact one of the experts on the forum wgo are mortgage brokers ..Ryan or Shaun. Their contact details are listed under meet the experts on the left or uunder the a-z of members.
Ryan has helped over 20 forum members (me included) gain mortgages all at different rates and circumstances...give them a call after the Christmas break and see what they can do.

[mazbrown]

Hi and welcome to the forum , an expert will comment on this soon , Ryan often helps people with mortgages , you can get his contact in the expert section .

[Adam Davies]

Hi and welcome

Even though you will conclude your IVA early it will remain on your credit file six years from when it started and my understanding is that you will find it near impossible to find a fresh mortgage with this on your credit file.

Consider renting out your current property and moving to larger rented accommodation

Regards

[atomicdev]

Hi luluj, yes I am hoping Ryan will contact me and offer his expert advice, thanks

Andy, I've considered this but isn't it illegal to rent out your property without changing to a buy to let? Who's gonna give me one of them! Seriously, I'd do it if it means we can gain that extra space we're desperately going to need but of course moving would just be the ultimate better option.

Husband has a car on finance and a perfect credit rating and like I said I don't have any other debts just this damn IVA, which will soon be settled.

[luluj]

I have alerted Ryan to your contact ..... He is probably away from work now until thr New Year.

[atomicdev]

Thank you

[ginger323232]

Atomicdev - No its not illegal to rent out property on a domestic rate mortgage - it fact most lenders will allow you to rent out for about two years before switching to a higher rate buy to let. However you do need to get their permission, and some lenders will charge a fee for this. There is also tax implication on the income as well a over head costs (ie gas and electric certificates etc)

[Free Bird]

Speaking as a landlord myself, I don't agree that 'most lenders' will allow you to rent out for 2 Years. I am with Halifax, and they limited me to 6 months.

This was a few years ago when Mortgages were easier to find. I had to remortgage the flat on a buy to let product, to raise a deposit for the standard mortgage on the home we were buying.

So the OP will need a definitive answer from their lender. Hopefully they are with a more agreeable lender).

Chances of getting any sort of mortgage within the 6 years is reportedly nigh on impossible.

Atomicdev: hope you sort something out, and let us know how you get on.

[ginger323232]

Sorry free bird - speaking from personal experience - my lender was able to agree to myself renting property out for 2 years - then it would be reviewed. This allowing people to move to different parts of the country to take up employment job relocation. I did state MOST lenders - also from you are saying - the rented property would NOT have been you're permanent residence

[UpToMyNeckInIt]

atomicdev,

Well done on nearly completing your IVA. Your credit file should restore fairly quickly 6 years after the START of your IVA. (It may help to start using that Vanquis card as well - just pay it off each month to avoid interest). So I hope you can hold out a little longer, at which point you will hopefully be able to arrange a mortgage.

If considering 'letting' your house on your existing residential mortgage, you are quite right: You must seek your lender's permission.

Regarding how long you are allowed, to my knowledge there is no standard rule (to suggest the '2-Year' figure as being the most likely, without evidencing that, is a little optimistic in my opinion - my lender only allowed 6 Months).

Fact is, some lenders simply wont allow it at all, Others clearly allow a lot longer it seems.

Found a useful article on the subject here:

http://www.thisismoney.co.uk/money/expe ... ender.html

Hope this helps.

[atomicdev]

OK so renting my property out could be an option if Birmingham Midshires allow me to do this. If I go through a local letting agent will they ask me for confirmation of a buy to let mortgage or do they not ask for this? Are there any other things I would need to have along with Gas Safety Cert etc?

If I rented my property out for example, £600 a month that would give me say £1200 a year surplus income which I understand I would need to declare to my accountant. However, the house we would need as a large family and to a standard of living we are used to is easily going to cost £800 - £900 in rent per month. So in theory if renting is our only option we would need to spend in excess of £8000 per year (down the drain!).

Ideally and in a perfect world we want to sell up, secure a new mortgage (even if the rate isn't the best) and use the equity as deposit. There's no way my husband can just get the mortgage in his name as I'm pretty sure the amount he could lend on a £16000 a year income would be pretty low. I'm hoping a lender will look at our situation, see the IVA as settled, 8 years of mortgage payments and give us a chance. Hopefully Ryan will contact me soon and be able to offer some light at the end of this tunnel. If not, then yes renting and throwing a ton of money down the drain may be the only other option as one thing's for sure, 4 kids in this 2 bed house is going to be impossible.

[UpToMyNeckInIt]

a reputeable letting agent will want to see evidence of a BTL mortgage, or at least that you have permission to rent it out from your existing lender. The will want to see evidence of things like up to date gas safety certs.

You might want to look at ways of minimising your rental outgoings: Appreciative that this arrangement is temporary, could you go 'interest only' on the existing mortgage? (as is the norm for BTL products).

If your accountant is anything like mine, they are great at minimising your income on paper for tax purposes etc. BUT they can also be called upon to use your business turnover figures for mortgage application purposes. Again, worth looking into.

A chat with Ryan (or indeed any whole of market mortgage broker), your accountant, and your IP is in order I suspect.

I am sure that there is no quick or easy solution here, but I sincerely hope you sort something out, and please keep us updated.

[atomicdev]

Having thought more about the renting my property option out I've decided this is not the best route. I'm going to put my house on the market within the next few months (once I know the IVA is closed) at top price and if I get a good acceptable offer then I think I'll just go ahead and sell up and move my family to rented accommodation until we can secure a mortgage together.

I'll be sat on around £50k for deposit, maybe more if can't get sorted within the next year or so. The only thing that worries me with this route is if not having a mortgage at the time of trying to get one could go against me. My file will show 8 years of non missed mortgage payments. Has anyone done something similar or how long did you secure a mortgage after completing your IVA?

[Pandy]

Am I being blonde here, but if you are going to have 40K equity, after paying the 10K suggested to end your IVA , I cannot see your creditors settling for only 10K.
Knowing me I have probably read/ understood it wrong...