IVAs are on the rise, but there’s a growing number of mortgage options for borrowers who have satisfied an IVA within the last year or are even still within one. So, what do you need to know about mortgages for clients with an IVA?
The second quarter of last year saw a record number of IVAs issued to individuals, with nearly 29,000 IVAs during a three-month period, representing the highest figure in six years and a 27% increase on 2017.
So, how many of your clients have a current or recent IVA? And how many have written off their own chances of getting a mortgage?
We are currently seeing a lot of demand from clients in just this position, and we work with lenders that are able to help. So, what do you need to know?
First, it is worth being clear on the definition of an individual voluntary agreement (IVA). An IVA is a legally binding agreement between a borrower and their creditors to pay back their debts over a period of time.
It’s a formal, legal debt solution, which means that it is approved by the court and creditors have to stick to it, and while it is a form of insolvency, it is different from bankruptcy.
The insolvency practitioner will work with the borrower and their creditors to agree an amount they will repay, usually over a period of five or six years and monthly repayments are then paid directly to the insolvency practitioner before being distributed to the creditors.
If the payments into the IVA are not enough to pay off debts in full, the rest will be written off and, when the IVA is finished, a borrower no longer has to pay their creditors for the debts in the IVA and the record of the IVA is taken off of the insolvency register.
For clients in an existing IVA, that has been in place for the last 36 months, we work with a lender that can offer up to 75% LTV for 4.65%, as long as there has been no other adverse in the last year. The criteria for this product states that there should be a life event that provides a reason for the IVA, but it’s the case that there is usually a reason for any IVA, so it’s always worth picking up the phone to discuss.
We also have access to a semi-exclusive product for clients who are still in an IVA, as long as the IVA is repaid upon completion. This product is available up to 70% LTV for 6.73%.
There are mortgages for borrowers with an IVA available in Scotland and even for clients using Help to Buy, so don’t be put off if your client has an IVA. Give Brightstar a call to discuss what’s possible – there may be more options for them than you think.
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