An IVA or Individual Voluntary Arrangement is a legally-binding agreement between you and your creditors in which you agree to make one payment out of your income each month to help you clear outstanding debts. This payment amount is based on your personal budget, so the amount is manageable for you, and the payments are spread over a fixed period of time. An IVA is useful when you need to prove your ability to make payments to high street mortgage lenders. However, under the terms of an IVA, you agree to contribute as much as possible toward paying off your debts each month. In short, an IVA gives you an opportunity to pay a manageable amount each month in order to pay off your outstanding debts.
Unlike bankruptcy where all your assets are sold to pay off your debts, with an IVA your home is protected and your job is not at risk. However, although an IVA will not have the same detrimental effect on your assets, it is logged on your credit report for six years, meaning that it will be seen any time a mortgage lender or a loan provider checks you for credit-worthiness following an application. Therefore, for the duration of this period, until your credit rating returns to normal, you will only be eligible for bad credit mortgage loans.
Although there are a number of lenders in the market specialising in adverse credit mortgages, designed for people who have had debt issues in the past, it is much harder than it used to be to get a bad credit mortgage due to the tightening of lending criteria since the credit crunch began. The type of IVA mortgage that you'll be offered will therefore depend on how long ago your IVA was cleared and on the amount you're able to offer as a deposit. Essentially, even the bad credit lenders will want to know that you are able to pay back the money you borrow, so if you have a sizeable deposit to put towards the cost of the property, and if you have demonstrated an improved level of financial management since your IVA was cleared, you will have a better chance of getting a good deal on your IVA mortgage.
Due to the complex nature of an IVA mortgage product, we would recommend that you seek specialist financial advice, to ensure that you take out a mortgage that you are able to keep up the repayments on. If you would like some assistance finding a qualified bad credit mortgage broker, simply fill out our short bad credit mortgage form and we will connect you with an adviser from the SimplyFinance network.