Understanding How an IVA Affects Your Credit File
An individual voluntary arrangement (IVA) is a legally binding agreement between you and your creditors to repay a proportion of your debts over a set period, usually five or six years. It is arranged through a licensed insolvency practitioner and is recorded on both your credit file and the Insolvency Register.
The IVA entry remains on your credit file for six years from the date it was approved, not from the date it was completed. This means that if your IVA lasted five years, it may only be visible on your credit file for one year after completion. However, if your IVA lasted six years or more, it will already have dropped off your credit file by the time you finish it.
Your entry on the Insolvency Register is removed three months after the IVA is completed. While most mortgage lenders focus on your credit file rather than the Insolvency Register, some may check both.
Can You Remortgage During an Active IVA?
Remortgaging while your IVA is still active is extremely difficult. The terms of most IVAs prevent you from taking on new credit without the permission of your insolvency practitioner (IP). You would need to obtain written consent from your IP before making any mortgage application.
Even with your IP's agreement, very few lenders will consider an application from someone in an active IVA. Those that do are specialist lenders who charge significantly higher rates. In most cases, it is advisable to wait until your IVA has been completed before attempting to remortgage.
One exception is if you are remortgaging to release equity to pay off your IVA early. Some IPs support this approach if it results in the IVA debts being cleared in full, and certain specialist lenders facilitate this type of transaction.
Remortgaging After Your IVA Has Been Completed
Once your IVA has been completed and you have received your completion certificate, your options begin to improve. The key factors that lenders consider are:
- Time since completion — the longer the gap, the better your chances and rates
- Whether the IVA is still on your credit file — once the six-year period expires and the entry is removed, your options expand significantly
- Your credit behaviour since the IVA — a clean record after completion demonstrates financial recovery
- Your loan-to-value ratio — lower LTV means more options, even with a recent IVA
Specialist lenders will consider applications from borrowers whose IVA was completed within the last few years. Once the IVA drops off your credit file entirely, some near-mainstream lenders may also be willing to consider you.
Rates and What to Expect
Interest rates for borrowers with a recent or still-visible IVA will be higher than mainstream rates. Expect to pay a premium of 2% to 5% above the best available deals, depending on how recently the IVA was completed and your overall financial profile.
As time passes and you rebuild your credit, you can remortgage again onto progressively better rates. Many borrowers with IVA history follow a stepped approach — first moving from their SVR to a specialist deal, then remortgaging to a near-mainstream product once the IVA has dropped off their file.
A specialist mortgage broker is essential in this situation. They understand which lenders have the most favourable criteria for post-IVA borrowers and can present your application in the best possible light.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.