Mortgage with a Debt Management Plan

Debt management plans (DMP) are strategies put in place by debt management companies to help you and your lenders organise your debts and put a timescale in place for when you will make repayments.

It’s natural that those with a DMP would think it’s difficult to get a mortgage and although it’s definitely not easy, it’s possible. Dealing with a DMP when mortgaging can be frustrating, but the main issue is that people don’t know where to start looking and who is the best person to go to.

Lenders on the high street will probably decline applicants who have had a DMP in the last six years, so you will need to approach a specialist lender. Going down the normal route of a broker to get a mortgage may seem like the natural process, but with DMP’s, brokers have restricted lending panels. This means you need to choose your broker or lender carefully when attempting to get a mortgage.

How do I get a mortgage with a debt management plan?

There are a few important factors that can help you mortgage with debt management plans:

Deposits and equity

If you have had credit issues such as County Court Judgement’ (CCJ’s) or defaults, then you’ll need a minimum of 15% deposit/equity borrowing to a maximum of 85% loan to value (LTV).

If you are clear of any credit issues, then you can get up to 95% LTV under the help to buy scheme, but you must remember that you are only eligible for this is if you don’t have any CCJ’s, defaults, or any other credit issues visible on your credit report.

Income and affordability

When applying for a mortgage with debt management plans, it’s possible to obtain 5x your income, especially if you have a good deposit amount and no other adverse credit issues. 

Your affordability will be impacted by the monthly cost of your DMP if you don’t plan to repay it either before or when the mortgage completes. 

Unlike traditional mortgages, some specialist lenders are quite flexible when it comes to how people mortgaging with DMP’s raise their income, such as those who are self-employed and don’t necessarily have a guaranteed, monthly income. 

Additional credit history

If you have a DMP then it’s likely you will have other credit issues and these joined with the DMP’s are very unattractive to lenders. Like with most loans, each case is different and there is not a definitive, textbook answer on whether those with credit issues and a DMP can qualify for a mortgage. However, in cases where there aren’t a large number of additional credit issues, mortgages with DMP’s are usually granted.   

Remortgaging with debt management plans

Remortgaging with a DMP is an attractive proposition – you can free up some money by releasing equity to pay off your outstanding debts. However, the required characteristics are similar to many other forms of loan, you should have enough equity in your home and you must be able to demonstrate that you can afford the monthly repayments.

Mortgaging with settled debt management plans

If you have had a DMP in the last six years, it won’t really make a difference to the mortgage application process, the points that have already been mentioned will still be applicable to your situation. 

However, if you have seen a DMP plan through, you will be attractive to a lender, because you are demonstrating your ability to repay your loans. With this in mind, when you are applying for DMP’s, it’s advised to have an up to date credit report, ensuring all your information is correct. This includes making sure any incorrectly outstanding defaults have been marked as satisfied by the lender it concerns, as this could jeopardise your mortgage application.

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