Getting a Mortgage with a Debt Management Plan (DMP)
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In this guide, we examine how Debt Management Plans (DMPs) affect your chances of securing a mortgage. This covers satisfied DMPs, but also if you are still in the plan.
Additionally, we explore the criteria lenders use and identify which lenders are likely to consider your application.
What we’ll cover:
- What is a debt management plan (DMP)?
- Can you get a mortgage in a debt management plan?
- How do you get a mortgage with a DMP
- Can I apply for a mortgage before the DMP is satisfied?
- How soon after a DMP is satisfied can you apply for a mortgage?
- Debt Management Plan status
- Deposit / Equity with a DMP
- How much could you borrow?
- Can I Re-mortgage with a Debt Management Plan?
- FAQs
What is a debt management plan (DMP)?
A debt management plan (DMP) serves as an informal agreement between you and your creditors to repay unsecured debts, such as credit cards, personal loans, and store cards.
With this plan, you make a single monthly payment, which the DMP provider then distributes among your creditors. While DMPs are managed by a provider, they are not legally binding, allowing you to cancel at any time, and they do not require a minimum payment amount.
DMPs remain on your credit report for six years.
To find out if a DMP appears on your credit file, download your credit reports by starting a free trial with one of our credit report provider partners.
Can you get a mortgage with a Debt Management Plan?
Yes, you can secure a mortgage with a debt management plan (DMP), but it will depend on your personal circumstances. Lenders will take a close look at your DMP payment history. Whether your DMP is still active, or not. If not, how long ago it was satisfied.
If you are currently managing debts under an active plan, your options will be more limited. Most lenders, especially high street banks, typically won’t consider applications with an unsatisfied DMP.
Regardless of your DMP’s status, it’s important to know that some lenders are open to considering your mortgage application. The key is to find them, ideally through a specialist broker, and be prepared for potentially less competitive terms.
How do you get a mortgage with a DMP
Speak to a mortgage broker that specialises in bad credit, as this will make your life much easier and enhance your chances of getting any mortgage application agreed. We have helped many clients with past credit hiccups obtain a mortgage, so you can be sure you’re in safe hands.
Your dedicated mortgage advisor will guide you through the following steps:
Review Your Credit Report: Access a free trial of Check My File (normally a monthly charge). You can view your credit report with all three main credit reference agencies. This will give your broker a clear picture of your credit history.
Establish How Much You Can Borrow: Attempting this without expert advice can be challenging, as debt repayments must be included in your outgoings. However, a broker can provide bespoke calculations.
Finding a Suitable Lender and Best Deal for You: We have years of experience dealing with the lenders who can offer mortgages people with DMPs. We can secure you a great deal through one of these lenders.
Can I apply for a mortgage before the DMP is satisfied?
Yes! However, there will be more options open to you once the DMP is settled. That said, the important thing is that you can still get a mortgage before your DMP is paid off. That said, you would have more options applying after the plan is satisfied.
How soon after a DMP is satisfied can you apply for a mortgage?
The approval timeframe largely hinges on the specific lending criteria and the severity of your DMP. Generally, you can expect a typical timescale of 12-36 months.
Consulting a broker experienced in this area can be incredibly valuable. We can pinpoint lenders who have a more open view with applications where a DMP has been satisfied within this timeframe or even sooner.
However, remember, we can also help people when the DMP is not satisfied!
What else is important?
The status of the Debt Management Plan
Each lender sets different criteria for how long your DMP should have been active or satisfied. Timing plays a crucial role when applying for a mortgage with a DMP. Typically, lenders that can consider application where there is an active DMPs like to see no missed payments for the last 12 months, demonstrating responsible financial management. A Copy of the latest DMP statement will normally be required.
Mainstream lenders, however, expect your DMP to be satisfied and a specific timeframe to have elapsed, usually between one to three years. After this period, many lenders disregard the DMP entirely. Waiting a bit longer before applying for a mortgage can provide more options, which in turn may mean an improved deal.
Deposit requirements
Having a Debt Management Plan classifies you as an increased risk. Therefore, lender will normally require a higher level of deposit, or equity in a property. Typically, you may be required to provide up to 30%. Whether your DMP is currently satisfied and which lender you approach will influence this requirement.
Higher interest rates on a mortgage are to be expected with a Debt Management Plan. However, if you can provide a larger deposit, this may help.
How much could you borrow?
How much you can borrow is typically based on a combination of your income and outgoings. However, the DMP will also need to be considered.
Typically, 4.5x you income is a fair benchmark. However it is possible to go higher in some cases. Equally, depending on your outgoings, it may end up being lower.
Can I Re-mortgage with a Debt Management Plan?
It is possible to re-mortgage with a DMP, whether it is satisfied or not. Basically, all of the same principles mentioned above apply.
One of the important consideration when trying to re-mortgage with a DMP is the status of your existing mortgage – have you missed any payments etc.
As mentioned, if you have a lot of equity in your property, this will go in your favour as this helps to mitigate the risk from the lenders perspective. It may also be possible to remortgage with additional borrowing to pay off a live DMP. Sometimes this may actually be the only option if your outgoings including maintaining the DMP are quite high.
The best thing to do is speak to a specialist mortgage broker to discuss your options.
Get in touch!
We support you at every stage. We recommend products, help you apply for a mortgage, and follow up on your application until completion.
Take the stress out of finding a mortgage deal with bad credit, contact us to see if we can help you. Know exactly who you will be dealing with from the outset.
Your home may be repossessed if you do not keep up repayments on a mortgage secured against the property.
You can also find further information on Debt Management Plans at Citizens Advice.
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