This was an application referred over to us from another Mortgage broker we know. It was something that he did not believe he could help with – he actually did not think it could be placed at all but as the couple were lovely he wanted to run it by us before saying he could not help.
This was a new one for us on a couple of fronts.
The first one was that despite the fact we do a lot of Mortgages for people with credit problems, this is the first time we have ever done an application for someone currently in an IVA.
The second new one for us what that we went to a lender we have never used before. That is always a little nerve wracking as over time you start to see that lenders all have their own quirks and little things that can stop an application in its tracks. When you submit an application to a lender you have never used before, there is always a fear that something very minor will be missed and will cause a problem.
What was the situation?
We are doing a Mortgage for a couple, one of the applicants had got into a mess with their credit cards and catalogues a few years prior. They went online to look for help and were advised to take out an IVA. I can not really comment on that, but an IVA for £6,000 in credit cards seems a little extreme, but we can only deal with the application as it comes to us, we can not change anything that has already happened.
The customers had a large deposit to put down which came from inheritance and so the large deposit definitely helped the application.
What we did
As mentioned, this was something new for us as the IVA was still in force so we had to spend a little longer doing the research. The companies that we are used to dealing with all advised it was not something they could help with as it was not within criteria and they were not comfortable making an exception despite the large deposit.
We cast our net a little further and started to talk to a few other lenders. We managed to find 3 who would consider it. The lender we went to was a little building society and they had a product where the IVA was within criteria, their rates were also reasonable considering the situation (4.8%) and so that was the lender we submitted the application to.
The other 2 options, the application either did not fit and so we would be reliant on an exception being made or another lender who did not have specific criteria but it would need to be referred over to their lending committee to take a vote on it (this is the way some smaller building societies work). Those 2 lenders would have been looking at rates of around 7-8% however and so not only were they going to be more work upfront, they were also much more expensive.
The full mortgage offer was issued this week and the applicants had already started the legal work and are hoping to be in before Christmas.
We do a lot of adverse, but a lot of what we see is quite similar. Multiple defaults and or CCJs, discharged Bankruptcies and IVAs or DMPs which may or may not be ongoing, those are our bread and butter applications. The details and reasons may vary but generally speaking 5 Defaults because of redundancy is treated quite similar to 7 Defaults due to divorce.
This however was different in that the IVA was still in place. I think the key things to take from this were that whilst I thought we had seen pretty much everything, there are still times where we get a situation that is different to what we usually deal with and that it never hurts to ask or get a second opinion like the mortgage broker we know did by asking us to take a look.