Getting a Mortgage With a Debt Management Plan (DMP)
Do you have a debt management plan and looking for a mortgage? Read our article for everything you need to know.
Firstly, have you had a Debt Management Plan registered in the last 6 years?*
No impact on your credit score
Author: Pete Mugleston - Mortgage Expert, MD
Updated: December 15, 2021
You might think having a debt management plan (DMP) in place would prevent you from applying for a mortgage. Fortunately, this is not the case and you can often buy a house or remortgage despite having an active DMP.
In this article we’ll explain how to apply for a mortgage with a DMP and why using a broker will ensure you get the best deal possible.
The following topics are covered below...
Can you get a mortgage with a debt management plan?
Yes, it’s possible. However, you’re unlikely to be accepted by a high street lender if your debt management plan (DMP) has not yet been satisfied, but there are lots of specialist lenders available in the UK who will still consider your application if that’s not the case.
If your DMP is still in place, some lenders will want to see evidence you’ve kept up with the payments for at least one year before considering you for a mortgage, but there are a few who will consider a lower timescale.
The type of mortgage you can get, and the lenders available, will depend on several factors:
- Whether your DMP is active or satisfied
- How long you’ve had it and how long it still has to run
- Whether you’re keeping up repayments
- The reasons for your debt issues
- The amount of deposit you have for a mortgage
With an active DMP or one that has been settled for less than 3 years, only having a handful of lenders available will obviously impact upon the interest deal you can qualify for. With this in mind, it’s important you approach the right one first time as a rejection can have a negative impact on your credit file.
If your DMP was satisfied more than 3 years ago, you will have access to a wider pool of lenders and should be able to get a better rate. A broker with experience arranging mortgages for this type of bad credit will be able to help you identify who these lenders are, giving you a better chance of success.
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How to get a mortgage with a DMP
Your application should be presented in such a way that you explain the reasons for your debt problems and show potential lenders that you will be able to keep up with your mortgage payments.
Follow these steps to make the strongest possible application:
Check your credit status
If you have, or have had, a DMP, it’s likely you have experienced other credit issues too. The first thing you should do is make sure you know everything that is going to show up when lenders carry out their checks.
To do this you can download your credit report to view the details held by each of the three major credit reference agencies:
Once you’re in receipt of your report you’ll be able to check if all the information they hold is accurate and if anything is wrong, get it rectified. If your DMP is satisfied, make sure this is reflected on your credit files – but remember it will stay on your record for six years from its inception regardless.
Gather all the evidence on your DMP
You will need to account for your DMP as part of your outgoings when lender’s assess whether you can afford your mortgage repayments.
Ask your DMP company for a statement of payments and also a reference to confirm the conduct of your account (basically, to confirm you’ve always kept up to date with your payments).
If your DMP is still active, you can request settlement figures from all your creditors. Most are likely to offer you a reduced settlement to clear the debt and you may be able to add that into your mortgage to clear the DMP and reduce your overall monthly outgoings.
Speak to a bad credit mortgage broker
Applying for a mortgage when you have a DMP can seem daunting. With limited lenders and uncertainty over how to present your application, it can be tempting to just take any deal you’re offered. But checking the entire UK mortgage market could secure you a much better deal and allow you to borrow more and the way to do this is to seek the guidance of an experienced mortgage broker.
There are lots of specialist lenders that operate in this niche market, each with its own criteria. The brokers we work with have previous experience helping people with a DMP get a mortgage. If you get in touch we can arrange for an advisor to contact you straight away.
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The eligibility criteria are very similar to applying for any other mortgage in terms of what lenders want to see:
- Identification and address verification
- Income and expenditure
- Employment status
- Credit history
- Size of deposit
Borrowing with an unsatisfied debt management plan
Additionally, if your DMP is still in place, you may need to provide:
- Evidence of satisfactory conduct of your DMP
- Bank statements as proof of how you manage your money
- Gifted deposit letter (if applicable)
- Details of why you needed a DMP
While mainstream lenders have strict credit scoring criteria, specialist lenders are more flexible and can assess applications on a case-by-case basis. Some will only approve a mortgage if your DMP has been in place for more than 12 months while others will consider applications sooner.
Not all providers have a maximum amount they will lend to someone with a DMP but some cap it at £250,000.
There are lenders who take into consideration almost any source of income and lend despite credit issues and a DMP if you can prove the loan is affordable.
Which lenders have you already tried?
40% of our customers had been declined elsewhere before coming to us. The brokers we work with will be able to assess your circumstances and then identify the right lender for you instead of going direct.
Borrowing with a satisfied debt management plan
How lenders handle applications from someone with a satisfied DMP varies, but the good news is at this point more mainstream lenders will be willing to consider giving you a mortgage. Some will approve provided they have evidence it has simply been cleared while others will only consider applications once the DMP has been satisfied for at least 3 years.
Some, but not all, providers will want an explanation for your previous credit problems and may only approve a mortgage if the DMP was for debts totalling under £5000. Most will expect you to have no adverse credit since your DMP was satisfied.
Typically, lenders would prefer you to have at least a 20%-15% deposit if borrowing with a DMP. This doesn’t need to come from your own account. If you have a family member who is willing to gift you the money for a deposit or stand as guarantor, your application will be strengthened and you will only need to borrow 80%-85% of the property’s value.
Other schemes to consider include:
- Help to Buy (requires a 5% deposit)
- Shared Ownership (typically requires a 5% deposit)
- First Homes Scheme (buy your first property at up to 50% discount and with no deposit)
- Right to Buy (buy your existing council home at a significant discount)
A small deposit, or no deposit at all, doesn’t necessarily mean you can’t get a mortgage with a DMP. A broker with experience in this market will help find the best solution for you.
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Remortgage with a debt management plan
If you have entered a DMP while already a homeowner, you may find it difficult to remortgage with your existing lender, or with a high street lender, when your fixed term runs out. This is because they will use the same lending criteria they would to assess any other application.
You should speak to a broker 2-3 months before your fixed term runs out. They will assess your circumstances against mortgages available from specialist lenders, and compare them with the standard variable rate you will switch to so you can make an informed decision on what to do.
If you have a good amount of equity, getting a mortgage should be fairly straightforward. Equity reduces the loan to value (LTV) which lessens the risk for mortgage providers.
Get matched with a debt management plan mortgage broker
A DMP is proof that you have taken steps to deal with debt issues and shows you in a good light. The problem you would face by applying without the support of a broker is that you won’t know which lenders are sympathetic to your circumstances.
The brokers we work with are experienced in finding mortgages for people with a DMP and have close working relationships with lenders in the industry. They know how to package your application correctly and can act as an advocate if necessary to secure a deal.
Call now on 0808 189 0463 or enquire online to arrange a free no-obligation chat.
It will only affect your ability to borrow if you are tied to them financially or if you make a joint application. On the other hand, your good credit rating will make their application stronger than if they apply alone
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Mortgage Expert, MD
About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!