Getting a mortgage whilst in an IVA

mightyjack

Good morning, although I imagine getting a mortgage whilst in an IVA is near impossible, with many different barriers to get over, has anyone ever successfully done it? if so can you recommend a specialist mortgage broker that may be able to help?

Chris_English

Do the terms of your IVA allow you to take on additional debt?

mightyjack

Chris_English said:

Do the terms of your IVA allow you to take on additional debt?

I'm looking into that, in the meanwhile I'd like to know..."can anyone recommend a specialist mortgage broker that may be able to help?

emmajones1976

I would suspect you would need a whacking big deposit, 5% mortgages are very difficult to get even for people with pristine credit files.  What size deposit do you have?

sourcrates

mightyjack said:

Good morning, although I imagine getting a mortgage whilst in an IVA is near impossible, with many different barriers to get over, has anyone ever successfully done it? if so can you recommend a specialist mortgage broker that may be able to help?

Four reasons why you should not obtain a mortgage whist insolvent.

Creditworthiness

All mortgage lenders undertake credit checks on new applicants as standard practice. This means that they'll be able to see from your credit file that you're in an active IVA.

Obviously, most mortgage lenders will reject your application when they see you're in an IVA but, fortunately, not all.

There are some specialist mortgage lenders prepared to offer mortgages to people in an IVA.

However, by the nature of the 'high risk' market they're in, they'll apply larger deposits and higher interest rates on the mortgages they offer.

The deposit

Currently, mortgage lenders offering mortgages to people in an IVA expect a minimum deposit of 50%.

This means that they'll only be willing to lend half of the value of the property being bought. They'll expect the remaining half to be put down in cash by the buyer.

For most people in an IVA this demand by itself will render the mortgage unachievable.

The interest rate

Interest rates for IVA mortgages will be significantly higher than those for people with a healthy credit score.

The higher rates ensure the mortgage company reward themselves for taking the extra risks they associate with lending money to someone in an IVA.

Even though they've protected themselves with a larger deposit, they'll still seek to inflate their profit margins.

Your IVA obligations

There are also other issues, relating specifically to the IVA, which need to be considered and addressed.

If you're in an IVA and you acquire an asset, such as a property which holds 50% equity, your Insolvency Practitioner (IP) will need to be informed.

The implications of acquiring ownership of a large asset midway through an IVA can be serious and warrant careful consideration. Potentially this could be considered an 'after acquired asset' and, as such, there may be implications related to the 'Windfall Clause' of your agreement.

Steps should also be taken to protect the interests of any 3rd parties that may want to 'gift' the deposit to you.

You would, therefore, be well advised to seek independent and professional legal advice before you make any commitment to purchase a property whilst midway through an IVA.

mightyjack

Again I'll repeat the question as I'm not asking for advice on whether I should get a mortgage nor am I asking if I'm allowed to. 

"has anyone ever successfully done it? if so can you recommend a specialist mortgage broker that may be able to help?"

mwarby

I got a mortgage with a settled IVA some 18 months or so before the IVA was due to drop off my credit file. At the time it appeared the few lenders who would consider an IVA wanted it to have been settled for multiple years, so I expect with an active IVA you may struggle.

When I took out my IVA it was common for homeowners to be required to seek a remortgage towards the end of the IVA in order to release equity. I'd think the application scoring for a remortgage would differ quite a bit from a mortgage for purchasing a property