Can I get a mortgage with a debt management plan (DMP)

Debt management mortgage (DMP)

What affect will having a current or previous Debt Management Plan (DMP) have on you getting a mortgage? Credit history plays a critical part in the ability of an individual to get a mortgage, a DMP is one of the credit issues that would be analysed before a person is cleared or approved for a mortgage. High street lenders do not like active debt management plans, however there are options available through specialist lenders. Our experts are highly skilled at obtaining DMP mortgages.

While being in a DMP may hurt your credit score and chances of being approved, it is still possible to secure good mortgage deal. A DMP harms your chances of getting a mortgage because most lenders associate it with poor financial behavior along with other credit issues such as defaults, late or missed payments, CCJs, and IVAs.

Updated 29th September 2020

Can I get a DMP mortgage?

Yes, there are potential options available if the DMP is satisfied or not. The lender will want to ensure you are able to make your monthly mortgage repayments. They will also want a good conduct history in the DMP and its standard requirement to show 12 months of payments which have been made on time.
They will want to know, and for you to prove the following.

  • Length of time in the DMP
  • How much is still outstanding
  • How long is left in the DMP
  • Debtors within the DMP
  • Reason for the DMP

Each lender works in slightly different ways. Your mortgage expert will be able to advise on the best lender for your circumstances.

Your mortgage expert will need to see a credit report, to obtain yours click here.

How much deposit will I need for a DMP mortgage?

With any bad credit mortgage, the more deposit you have the better. If you have 10% deposit, then there will be limited options available. If you have 15% deposit, then even more options become available with slightly better rates. The only 5% deposit options available would be by using the government back Help to Buy scheme. Click here to read all about the Help to Buy scheme.

Will a completed debt management plan affect me getting a mortgage?

A settled DMP is less likely to affect your chances of getting a mortgage since lenders will be more willing to consider your application in light of your enhanced affordability and (possible) improvement in credit score. If you settled your DMP over 12 months ago and have no further credit issues, your chances of obtaining a mortgage with a lower deposit will massively increase. Every high street lender has different criteria around the length of time after a debt management plan has been satisfied.

The lenders will still want to check that the DMP was satisfied with conduct. They may ask for proof the last 12 payments were made on time.

What happens if you already own a home?

Homeowners may also be wondering how a DMP may affect their tenancy, home, and mortgage. Your DMP should not affect your home if you are up-to-date and consistent with the payment of your mortgage and debts. It is also essential to be aware that a DMP does not necessarily stop your creditors from taking court action against you.

Is it possible to remortgage while in an active DMP?

Remortgaging may be necessitated by the need to cut down on monthly mortgage payments, renovate your home, or release additional equity. The process is just as hard as getting a new mortgage with an active DMP. Certain specialist lenders will accept remortgage applications from homeowners currently in a debt management plan and will even allow you to remortgage with debt consolidation to settle the DMP.

While remortgaging on an active DMP seems like an attractive proposition, it is crucial to consider factors such as affordability and the percentage of the home under your ownership. Under these circumstances it may be more preferential to remain with your existing lender if they are offering product transfers or look towards a second charge if you are wishing to release equity from your property.

Is it harder to get a mortgage in a DMP?

It is harder to get a mortgage in DMP. The lender needs to be sure you can afford the monthly payments and that you aren’t under any financial distress. Lending to people in a DMP or recently out of a DMP is classed as high-risk lending. This means lenders have extra checks that they must perform before agreeing to any mortgage. They will also need to fully understand how the situation arouse that you ended up in a DMP. If this was due to a life event rather than reckless spending, this would put you in a better light.

How much could I borrow if I’ve had a DMP?

Each case is assessed on its individual merits. The typical calculation is between 4-5 times income. The larger your deposit levels the more chance of borrowing more money.

If you’re still in the DMP, the mortgage lender will use the monthly DMP as a commitment. There is a lender who takes the total amount of debt within the DMP and uses 3% as a commitment.
They will also look at your income and any other expenditure, other debts, childcare costs and basically any monthly commitment.

Using the right lender for your circumstances is pivotal in ensuring you can borrow the money needed and at the best possible rate of interest.

Speak to a debt management plan mortgage advisor

There are many lenders available ranging from high street to specialist lenders. Most people go to their own bank, get declined or can’t borrow what they need – just because one lender has declined you, don’t give up.

Our mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.

The expert brokers we work with have experience in dealing with all aspects of debt management plan mortgages, and importantly using the whole of the market to access the very best deals available.

To find out how we can help call us on 0300 124 5655 or complete our quick enquiry form to speak to a mortgage expert.

 

 

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