Can I get a mortgage if I pay off my IVA early

Can I get a mortgage if I pay off my IVA early

If your aim is to speed up your chances of getting a mortgage, there is little point in trying to pay off your IVA early. Doing so is unlikely to help you at all.

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Can you get a mortgage after you pay off your IVA?

Paying off your IVA early will not help you to get a mortgage. Getting a mortgage is not just dependant on your IVA being completed. It also depends on whether the record is still on your credit file.

Despite what you may have been told, the record of your IVA remains on your credit file for the full 6 years whether it is paid early or not. So if for example, you pay a lump sum and settle at the end of the 3rd year, the record will stay on your file for a further 3 years.

There are no high street lenders who will give you a mortgage until the record comes off your file. As such, paying it off early will not help. If getting a mortgage is your only aim, you would be better off just continuing with your monthly payments.

Once the normal payments are finished, you won’t have long to wait until the record disappears from your file. Applying for a high street mortgage is then possible. That said, you are still likely to need the help of a specialist broker.

While the record of your IVA remains on your credit file, it is very unlikely you will get a mortgage. This is the case whether you pay the Arrangement off early or not.

So what is the benefit if you pay off an IVA early?

Paying your IVA early will not help you get a mortgage and quicker. However, it will give you significant other benefits. Firstly, you will no longer have to make ongoing monthly payments. You could rather put these funds towards saving for a deposit to buy a property.

Bear in mind, you are likely to need a deposit of at least 10% of the value of the property you want to buy. Everything you can save towards this will be a big help.

Also, once your IVA is paid, you will no longer have to hand over any extra overtime or bonuses you earn. These will be yours to keep. You can earn more without having to worry about how much your IVA payments will increase.

Any future windfalls will be yours. You can receive inheritance or decide to take money from your pension. Your IVA company will not have a claim on these funds.

Paying off your IVA early may help get a mortgage in the sense that you can save all the extra money you have towards your deposit rather than paying it into the Arrangement.

What if you are already a home owner?

If you already own a property, you might be able to remortgage to release equity before your IVA is completed. Perhaps you need funds for home improvement or to buy out a 3rd party (ex partner).

However, as part of the deal, you will need to raise a sufficient amount to pay off your IVA. There are no lenders who will give you a mortgage if you then remain in the Arrangement. You will need to speak to your IVA company and agree with them how much you would need to raise to achieve this.

It is very unlikely that you will be able to remortgage with your current lender. You will need to speak to a specialist mortgage broker who can find a lender who will help.

The interest rate you will be paying is likely to be far higher than the one your are on now. However you will not be stuck with this forever. Once the record of your IVA has come off your credit file (6 years from your IVA start date) you will be able to remortgage again and move to a far cheaper high street bank.

Want further advice about buying a property after an IVA or remortgageing your current property? Give us a call (0800 011 4712) or complete the form below and we’ll get back to you.

 

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