Can you get a mortgage with an IVA?

There are no technical reasons that bar a person in an IVA from applying for a mortgage.

However, since the credit crunch in 2008, most of the sub-prime mortgage providers have removed their mortgage products from the market place, making it nearly impossible for people in an IVA to be able to get a mortgage.

Large Deposit Required

Those lenders that did stay in the market place massively adjusted their lending criteria, making it even more difficult for people to qualify for a mortgage in the first place.

For example, in 2007 it was possible for a person in an IVA to find several mortgage lenders prepared to lend up to 85% of the value of the property they were intending to buy, meaning a relatively small deposit of 15% was needed.

But, at present, the minimum deposit demanded by mortgage lenders for someone in an IVA is 50% of the value of the property.

This means that if the property concerned had a market value of £100,000, there would need to be a £50,000 deposit if the buyer was in an IVA.

3rd party deposits

Most people would not have a chance to raise such large sums of cash and if they did, questions could be raised by the Insolvency Practitioner as to where the money came from, for it could be subject to the IVA.

This, however, would not be the case for 3rd party funds, where a friend or relative provided the deposit.

If you are in an IVA and have been given access to 3rd party funds which you are looking to use as a deposit, you need to protect the invested money from your IVA creditors.

You should make sure the paperwork specifically states the deposit is an investment from 3rd party funds, and that you do not have any rights of ownership over that part of the equity.

This can be done through a 'Deed of Trust', where a solicitor draws up a legal document which outlines the provision of funds and the terms under which they have been provided, thus removing the chance of your creditors claiming any rights towards the introduced capital.

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