Although it’s not impossible, it can be very difficult to get a mortgage while you have an Individual Voluntary Arrangement (IVA). Because of this, some people look into paying off their IVA early so they can look at applying for a mortgage.

In this article, we’ll explore what’s involved with paying off an IVA to get a mortgage. We’ll cover what an IVA is, how paying off an IVA works, how long an IVA stays on your record for when it’s paid off, and the process involved with getting a mortgage after an IVA.

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What is an IVA?

An Individual Voluntary Arrangement (IVA) is a debt solution design to get you back in control of your financial circumstances. If you’ve got monthly payments that you can’t afford, an IVA allows you to take all your debts and transform them into one affordable monthly payment.

An IVA is set up by a professional insolvency practitioner (IP). The IP you choose sets up the agreement by getting in touch with all of your creditors (companies or people you owe money to) and arranging a repayment plan – usually over five or six years.

From your IVA application right through to the end of the agreement, your IP will communicate with your creditors for you. Your payment is made to the IP, then it’s broken down into smaller payments that your IP makes to each of your creditors. Any remaining debt at the end of the IVA is written off.

Will an IVA affect me getting a mortgage?

In short, yes – having a active IVA can make getting a mortgage very difficult.

Even if you don’t have an IVA, there are lots of hoops to jump through to get a mortgage. Having a current IVA adds to these challenges – especially because it’s recorded on your credit file and will be visible to any mortgage broker or lender you apply with. This can affect your chances of getting accepted and the interest rate you can expect to pay.

Since an IVA can make the mortgage application process tricky, it makes sense why you might decide to settle your IVA early.

What happens if I want to pay off my IVA early?

Even though an IVA normally runs for five or six years, there’s no minimum length – so an early settlement is possible.

How you end your IVA will depend on your unique circumstances. The simplest way involves paying off the full amount of debt owed. Alternatively, you may be able to come to a ‘full and final settlement’ – a one-off lump sum payment that you can offer your creditors to tie up what you owe.

Whichever route sounds best for you, you should always start by talking to your insolvency practitioner. Your IP is unlikely to suggest paying off the full amount; instead, if the full and final settlement lump sum offer you make is large enough, your creditors are likely to agree to it and write-off the rest of your unsecured debt. This means no more monthly payments.

Does a settled IVA mean you can then get a mortgage?

Although paying off your IVA might free you of your monthly repayments, it doesn’t necessarily mean lenders will be keen to offer you a mortgage straight away.

It all comes down to your credit history and the credit rating that lenders use to decide if you’re safe to lend to. Even if your financial circumstances have changed drastically, previous credit issues and struggles with debt will mean a lot of lenders will not consider your application.

How long does an IVA stay on my credit report if I pay it off early?

An IVA stays on your credit file for at least six years after the date it was approved.

Since most individual voluntary arrangements run for the whole six years they’re arranged over, this means you’re free to start rebuilding your credit rating when your final payment is made.

However, paying your IVA off early doesn’t change how long debt solutions are recorded for – so even when you’ve received a completion certificate, there’s still evidence of it on your credit report and on the insolvency register.

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How long after finishing an IVA can I get a mortgage?

In theory, getting your IVA completion certificate from your insolvency practitioner is a green light when it comes to applying for mortgages – especially as you will no longer have to discuss your plans with your insolvency practitioner.

However, like we’ve previously outlined, you may find that lenders still consider the IVA for as long as it’s on your credit file.

That said, a specialist broker or specialist mortgage lender may be able to recommend mortgage products that are designed specifically for people coming out of debt solutions.

What happens if your financial situation changes during your IVA?

Staying in communication with your insolvency practitioner throughout your IVA is essential – especially if your financial circumstances change.

When you sign up to and IVA, you’re legally bound by its terms and conditions. A few of these terms and conditions talk about what happens if you come into money while the IVA is active.

In some cases, a significant change in your money situation or monthly income will give you the flexibility to consider paying your IVA off – but in other cases, finding yourself with more money may you may be legally obliged to increase your monthly repayment or make a lump sum payment towards what you owe.

There’s no one-size-fits-all when it comes to an IVA – which is why the best insolvency companies will have trained staff on the end of the phone available to talk about your specific circumstances and walk you through the best options for you.

Where can I get more information about getting a mortgage after an IVA?

If you’re considering an IVA and wondering what an early repayment would mean to your chances of getting a mortgage, getting professional advice is the best place to start.

At IVA Plan, we offer a range of insolvency solutions – but we specialise in IVAs. Our team of advisors will talk to you about your situation, your hopes or plans around getting a mortgage after your IVA, then help you find the best debt solution for your unique circumstances.