Can I get a Mortgage with a Debt Management Plan?
This is one area where I have seen an increase in the number of lenders prepared to offer mortgages if you are in a Debt Management Plan (DMP)
If you had come to me 2 or 3 years ago, the number of lenders in this market space would have been 1 or 2 but today I know of at least 12 lenders prepared to consider you for a mortgage – some of them do not make it a condition the DMP has been cleared. Providing you have made the monthly payments on time and have not missed any, they treat this just like any another loan when assessing you for affordability.
You will need a specialist DMP broker if you find yourself on a DMP and it’s only natural to worry about how it could affect your mortgage application. However, taking actions to pay off your outstanding debts through a Debt Management Plan doesn’t mean you’re unable to apply for a new mortgage. In fact, securing new mortgages for people on debt management plans is one of my specialities.
While your options may be limited due to the DMP, I will be able to find a mortgage provider who will consider your request. As with all applications, these lenders will be asking themselves one question when we submit your request: “Will this person pay back the money we lend them?”
When it comes to answering this question from mortgage providers, your Debt Management Plan presents you with an opportunity. If you’ve kept up with your monthly repayments for a year or more, you’ll show the bank or building society that you can be trusted to consistently make payments on time.
Debt Management Isn’t Always a Red Flag to Mortgage Lenders
Drawing upon nearly three decades of industry experience, I’ll help you to prepare your applications, limit the impact of your DMP, and secure the mortgage needed to purchase or remortgage your home
Once you are established on your Debt Management Plan, mortgage applications can be made to borrow up to 95% of your home’s value. You will also be required to meet the following criteria:
Deposit: While you can be approved for a mortgage of up to 95%, this requires that you have no defaults registered in the last 36 months, no CCJ’s registered in the last 72 months and the DMP going for at least 12 months. Otherwise, the amount you could borrow is 90%.
Credit History: A Debt Management Plan demonstrates that you have suffered from financial difficulties in the past, but this will only become a serious problem if you have late payments, defaults and CCJs on your file. If this is the case, I will be able to advise you on how best to proceed.
Income: Lenders typically limit the size of your mortgage to between four to five times your annual incomes. However, your Debt Management Plan will need to be taken into account as you are committed to regular monthly payments for a period of time. This may lead to you being offered a smaller mortgage. If however you are on a higher salary, I know of lender that would go above 5 times your income – call me if this is what you are looking for.
What about Payday Loans?
Many of the people who come to me asking about the effects of a DMP on mortgage applications also ask about payday loans. My advice to them is very simple.
Do. Not. Take. Them.
While a DMP may not be an instant red flag for many lenders, multiple payday loans are as they instantly demonstrate that you are unable to prudently manage your finances.
Borrowing money every month for six months, just to keep you going until your next pay day paints you as far more of a risk to mortgage lenders than maintaining a DMP over the same amount of time. Strangely, lenders are far more relaxed about credit cards so if you find yourself short one month, use a credit card not a payday loan and make sure you pay off either the balance or minimum amount each month.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
For more information, call me on: 01494 526400 or complete my online enquiry form.