One of the motivations for some people starting an IVA, is to deal with their debt, improve their credit rating and finally make a start on the property ladder as a first time buyer. Saddled with debt is no place to start that process – so the longer term plan will be to become debt free and raise the credit score whilst beginning the painful push to raise a deposit.
And there is no reason why, following the completion of an IVA, we shouldn’t look towards our first mortgage. There are some key lessons to learn:
- Keep a close eye on your credit file – as already mentioned we will want to ensure the file is accurate and mention of old debts and the IVA, have long gone. The higher the score, the increased likelihood of being accepted for an IVA, and the better deal you will get.
- Save a larger deposit – putting down a bigger deposit reduces the risk to the lender and makes them more likely to accept your application. Saving for longer will also give you time to rebuild your credit rating.
- Look to specialist lenders – in extreme cases, and if you need access to finance quickly, it’s worth considering an “adverse credit” mortgage. Some companies are more likely to accept blips in credit history, however the interest rates on such deals will be higher. It is very likely that talking to an independent financial advisor will be worthwhile to discover if such deals are financially viable.
- Seek advice and be honest – being honest with your broker will allow things to run more smoothly. There may be no need to declare the IVA if it’s all off your file, but with lingering bad credit history, better to explain what has happened since you got into financial difficulty and steps taken to improve things.
- Look for a flexible broker – some are fairly rigid in their approach and are very quick to tell you why you won’t get a mortgage. But others are more flexible making them more adept at helping those whose credit history may not be back to the top levels. Don’t be put off on the first attempt.