Getting a Mortgage After a Debt Relief Order (DRO)

Having a debt relief order on your credit file can certainly make getting a mortgage more difficult, but once it’s been discharged it doesn’t have to mean a definite no if you do your research and have the right expert broker support.

In this article we’ll take you step by step through how to get a mortgage after a debt relief order, plus we’ll look at the kind of eligibility criteria, deposit requirements and rates you can expect.

Can you get a mortgage after a debt relief order?

The short answer is yes, although it won’t be straightforward and you may need to go to a lender who specialises in arranging mortgages for people who’ve had credit issues in the past.

A debt relief order (DRO) works by putting restrictions on your borrowing for a period of around 12 months, after which time your debts are discharged and you are ‘freed’ from the restrictions. The DRO will stay on your credit file for six years but all of the debts that it covered will be erased from your record after the restriction period.

You’ll likely stand a better chance of getting a mortgage with a DRO if you apply through a specialist bad credit broker, if the issue is historic and there was a reasonable explanation for it.

How to get a mortgage after a DRO: a three step guide

If you’re looking to get your finances back on track and build a secure foundation after a DRO then rest assured that, depending on your circumstances, it is possible to get a mortgage.  Here’s what you need to do to get the process started:

Find a specialist broker

Before you do anything else, get yourself a mortgage broker who specialises in finding mortgages for people with a DRO. As tempting as it might be to forge ahead on your own, if you rush things and end up getting an application declined this will only do further damage to your credit score.

You’re probably going to have to find a specialist lender, and your broker will be able to save you hours of research here, guiding you directly to the lenders who are most likely to accept your application, and advising on timings.

The specialist bad credit brokers we work with can also, potentially, save you a lot of money over the long term. Mortgage rates after a DRO are likely to be less competitive, and so having someone who can identify the best deals will give you the best chance of success.

If you get in touch we can arrange for an advisor to contact you straight away for a free, initial chat.

Check your credit record

Your credit file is going to be key in a lender’s decision making process, so it’s a good idea to download your record before you make your application so that there aren’t any mistakes or surprises. Check the details of your DRO are correctly recorded, that it’s showing as discharged, and that all of the debts it covered have been erased.

If you spot any errors, you can correct them at this stage rather than waiting until making your application.

Get all your documentation in order

Your lender is going to want a lot of information from you to assess your application, and they may be more thorough than normal because of the DRO. You’ll need basic things like proof of ID and bank statements, as well as information on your income and expenditure, payslips, and existing borrowing. If you’re self-employed you’ll also need accounts or evidence of your self-assessment tax returns.

Having all of this ready to go not only speeds up the process but it will help your broker get a clear picture of your circumstances and so find the best possible deal for you. Your broker can advise you further on exactly what documentation you’ll need if you’re not sure.

Eligibility and deposit requirements

Because you’ll probably be going to a specialist lender, eligibility criteria may vary more, and applications are more likely to be looked at on a case by case basis. However, the usual mortgage eligibility criteria will apply, so expect lenders to look at:

The age of the DRO

All lenders will want your DRO to have been discharged, and although there are mortgage providers who will consider applicants on day one since the discharge, the order your debt relief order, the better as far as your mortgage prospects are concerned.

Your income and existing borrowing commitments

One thing lenders will look at specifically with a DRO is whether you’ve kept your finances in good order since the DRO was discharged – accumulating subsequent bad debt won’t show lenders that you took the order seriously and are now a reliable borrower.

How much deposit you’re able to put down

When it comes to deposit requirements, a recently discharged DRO does put you in a higher risk category and this normally translates into a higher deposit requirement. Time is your friend here – the more time has passed since the DRO was registered and discharged, the higher the LTV (loan-to-value) you should be able to get.

Don’t be surprised if you’re asked for a 30% deposit if it’s only been 12 months since your debts were cleared. If you can’t afford this, you may need to consider holding off for a year or two until the deposit requirement comes down.

Your overall credit history

If you have other credit issues on top of a previous DRO, you will likely find it more difficult to get a mortgage. There are, however, specialist lenders who help borrowers with multiple credit problems, but your chances of getting approved will be stronger if your credit report shows responsible borrowing and has otherwise been strong since the DRO was discharged.

Lenders and rates

Most high street lenders, including at the time of writing, Barclays, Halifax and TSB, play it safe and won’t accept mortgage applications until the DRO is fully off your credit record after six years. Others – Nationwide and HSBC for example – take a slightly more open-minded approach and may consider application after three years.

There are lenders who will be prepared to look at applications made from 12 months after discharge of the DRO, but they will be specialist bad credit lenders who are best accessed via a broker.

When it comes to rates, expect to pay over the odds compared to the typical rates on high street mortgages, to compensate for the higher risk. You may be able to remortgage after an initial period to a more competitive rate, so don’t worry that you’ll be penalised forever.

Get matched with a broker who specialises in mortgages after a DRO

Whilst getting a mortgage after a debt relief order can be difficult and complicated, the good news is that finding a broker who has experience in this particular area can save you time and money and increase your chances of success significantly.

The brokers we work with have access to the whole of the market, and will have existing relationships with those niche, specialist brokers who are happy to consider applications from people with DROs, even if they’re relatively recently discharged.

Call us on 0808 189 0463 or make an enquiry and we’ll quickly assess your needs and set up a free, no obligation, call with a broker who has the right expertise and experience for your situation.