I will never be able to get a mortgage IVA Myth

Summary: I will never be able to get a mortgage - This article seeks to reassure those considering an IVA (Individual Voluntary Arrangement), that future borrowing - including mortgages are certainly possible for those who have undertaken an IVA.

Credit history

For those renting, but one day hoping to buy a mortgaged property, the issue of credit history is of great importance. What is certain is that by entering an IVA, the debtor's credit rating will be seriously affected. Of course it may be argued that if any debt repayments are in arrears or even the existence of the debts at all, will seriously affect someone's ability to obtain further credit.

Life after IVA's

The existence of a 5 year IVA will remain on a person's credit file for a total of 6 years, after which time the IVA and debt will be removed and the credit score improved quickly. Whilst finding a deposit may be a challenge, there is no reason why a person should not be able to obtain a mortgage in the future.

Mortgages during an IVA

Those who have existing mortgages as they propose an IVA will simply continue with their present arrangement. However for those on fixed rates that are due to end during the IVA, it may be wise to consider the effect of such a change on available income for the IVA. Similarly, for those not on fixed rate mortgages, the effect of any interest rate change should be taken into account. Some ask whether it's possible to obtain a first mortgage whilst in an IVA. The answer of course is that it is likely to prove very difficult.

In the creditors' interests

The supervisor of an IVA would need to be consulted if such a thought was even being considered. The first question would be where the deposit was coming from - as those in an IVA have to surrender such lump sums they inherit, win or are given. However if it can be demonstrated that someone else is funding the deposit (presumably secured against the property), there is then the challenge of convincing a mortgage lender that we are creditworthy. If we were somehow able to overcome this problem, we would then need to demonstrate that the creditors in the IVA were not losing out as a result. Therefore it is likely that the mortgage repayment would need to be the same or lower than the rent payment agreed in the IVA.

So - not altogether impossible, but it's very unlikely that a first time buyer could obtain a first mortgage whilst in an IVA. However once an IVA is completed, there is no reason why they shouldn't obtain a mortgage at favourable rates.