The following is a guest post from Houston, Texas real estate developer and entrepreneur Tracy Suttles.
An Individual Voluntary Arrangement (IVA) is a way of eliminating unsecured debt over a five year period. An IVA mortgage is a specialist bad credit mortgage loan. Defaulting on credit agreements will mean that the cost of borrowing will be more expensive. This may mean that an existing variable rate mortgage is more affordable, but this can be accurately assessed through the services of a bad credit mortgage broker.
Why Apply for an IVA Mortgage?
- There is a clause in the agreement that states that the insolvent will need to apply for a mortgage with an IVA at the end of year four. Subject to affordability, it is necessary to raise up to 75% of all available home equity to contribute to the Individual Voluntary Arrangement.
- Once released from the agreement, a bad credit home mortgage loan could help to reduce home mortgage payments. The likelihood of this increases several years after being discharged.
- An IVA mortgage can help to raise equity for a foreign holiday, home improvements or a new car.
A Minimum of 75% Home Equity
Although getting a mortgage with an IVA is more difficult, it is a lot easier if the applicant has sufficient home equity. Most Insolvency Practitioners expect their client to get a loan for up to 75% of the available equity because this is the maximum amount that most banks will lend. This figure was established because it protects lender interest in the event of repossession or negative equity.
Affordable IVA Mortgage Payments
The new bad credit mortgage loan must not affect the applicant’s ability to pay their Individual Voluntary Arrangement (IVA). If a year 4 mortgage with an IVA will make repayments more difficult for the insolvent, the Insolvency Practitioner (IP) – subject to approval – may be prepared to reduce the amount of equity that needs to be raised. Affordability is fundamental the individual’s future ability to remain solvent.
Credit Score Rating
Whilst someone who is in an Individual Voluntary Arrangement (IVA) won’t have a good credit score, it is important to check the credit report for errors and get any issues corrected. Don’t make too many applications for credit as each search will show for a period of not less than 12 months. Also, be sure to register on the electoral roll as this will almost always lead to a decline.
An IVA mortgage could be fundamentally important to the Individual Voluntary Arrangement (IVA). It can also help to reduce home mortgage payments several years after being discharged because credit score ratings will start to improve over time. It is worthwhile consulting a bad credit mortgage broker because they are better placed to identify the most competitive deal.