Can I get a mortgage after an IVA or Trust Deed?
September 14, 2016
The strict criteria applied by mortgage lenders make it difficult to obtain borrowing, even for those with a good credit rating. If you’ve entered into an Individual Voluntary Arrangement in Scotland, or a Trust Deed, unfortunately you won’t have access to borrowing until its completion.
Although it’s not impossible to get a mortgage after an IVA or Trust Deed, your chances may be limited for some time. It’s a good idea to approach a ‘whole-of-market’ mortgage broker or financial adviser, and to plan ahead in terms of saving for a deposit.
Certain factors influence the situation as far as lenders are concerned, including your current level of income and job security. The fact that your insolvency remains on your credit file for six years, however, negatively affects the ability to get a mortgage.
These are some of the issues that will be looked at by a lender:
Did a specific event cause your financial problems?
It is often divorce or redundancy that cause issues for people who were previously solvent, and had few financial problems. Even a small debt grows quickly when your method of earning a living is taken away, or other life events consume a previously disposable income.
The state of your credit file
Lenders will always check your credit file to establish the risks involved in lending. As an IVA or Trust Deed remains on your file for six years, unfortunately many financial institutions will be reluctant to lend during this time.
They will also look on your credit file for issues with your IVA or Trust Deed whilst it was in progress, such as whether all the payments were made in full and on time.
How much deposit you’re able to put down
Another crucial aspect of a mortgage application is the amount of your deposit – having a good deposit helps to secure lending and keeps down the interest rate. The nature of entering into a Scottish Trust Deed and IVA, however, means that all your disposable income has been directed to repay your creditors, leaving you with no means to save money during this time.
Because of this you may need to view your mortgage application as a long-term issue, and plan to put money away for a deposit over a period of time. For people with a good credit rating this can be around 20% of the purchase price; those who have had an IVA or Trust Deed could be expected to put down as much as 40%.
Improve your chances of being offered a mortgage after an IVA or Trust Deed
Rebuild your credit rating
‘Credit builder’ credit cards are advertised as being helpful to people in building a better credit score. High interest rates and low credit limits distinguish these cards from the ‘mainstream’ but offer a valuable way to demonstrate your credit-management skills.
You need to ensure the balance is repaid in full each month, and not use up too much credit as it reduces your mortgage affordability.
Make sure your credit report is accurate
The IVA or Trust Deed should disappear from your credit file six years after its starting date. It’s worth checking this when the time comes, and also making sure that other information held by the credit reference agencies (Experian, Equifax, and Callcredit) is accurate.
Save for a deposit
A decent deposit will encourage lenders to offer you more choice because their risk is reduced. You could gain access to lower interest rates and cheaper borrowing costs.
For more information on getting a mortgage following a Scottish Trust Deed or IVA, call our experts at Scotland Debt Solutions.
If you’re worried that the council might take action against you for non-payment of council tax, entering into a Scottish trust deed can be a beneficial step. It stops legal action by all creditors included in the arrangement, and provides a ‘safe haven’ from which to regain control of your finances. As council tax arrears […]
A debt payment programme (DPP) remains on your credit file for six years, along with other default markers and court judgments that have been made against you. This can seriously affect your ability to borrow for this period of time, and longer. Even if you can secure borrowing, lenders are only likely to offer unfavourable […]
If you owe a debt of £5,000 or less, your creditor may send you a Simple Procedure Notice of Claim. This is a relatively new procedure that was brought in by the Scottish government and commenced on 28th November 2016 – their intention being to make it easier to resolve debt disputes. So if you’ve […]
A Bankruptcy Restriction Order may be made against you if it’s believed that you acted dishonestly, recklessly or unlawfully before you were made bankrupt, or during your bankruptcy. Your Trustee will inform the Accountant in Bankruptcy (AiB), and if their suspicions are upheld, a BRO of 2-15 years can be made depending on the seriousness […]
Debt payment programmes (DPPs) are an intrinsic part of the Debt Arrangement Scheme, which allows you to pay off unsecured debt at an affordable rate. If a debt payment programme is rejected by one or more creditors, the DAS Administrator can apply their discretion on whether to approve the plan, after using a test to […]
If you’re struggling to pay your unsecured debts, a debt payment programme could help you to regain control of the situation, and become financially stable again. Debt payment programmes are a fundamental part of the Debt Arrangement Scheme (DAS) in Scotland, and allow you to repay over a longer period of time. These programmes involve […]