Mortgage with a Debt Management Plan (DMP)

Can I get a mortgage with a Debt Management Plan (DMP)?

Yes you can. It is possible to get a mortgage with a Debt Management Plan. The exact details of your DMP, such as when it started, the current status of it, and the reasons for it, will determine your chances of success when applying for a mortgage. Generally speaking, the longer ago the DMP was registered, the better. You’re also more likely to be accepted if your DMP has been cleared before applying although this is not necessary as many lenders will allow you to keep the Debt Management Plan running.

Getting a mortgage with a debt management plan is almost impossible with high street lenders. However there are several specialist lenders who will consider applications from those with or after a DMP.

How will a DMP affect my mortgage application?

As with most credit issues, having a DMP registered on your credit file will definitely impact your mortgage application, and for most mainstream lenders will result in an automatic rejection.

This is why it’s incredibly important to have prior knowledge of which lenders are likely to approve your application with a DMP, and exactly what their lending criteria is – both around DMPs and in general. Otherwise you may be applying with lenders who simply would not accept applications with DMPs, build up a list of rejected applications, which would result in further damage to your credit file.

As an experienced bad credit mortgage advisor, I know exactly which lenders will provide mortgages with debt management plans, and crucially, their full list of lending criteria. This means you will only ever apply with lenders where you fit the criteria and are likely to be accepted first time.

Do you have to declare a DMP on your mortgage application?

Yes, absolutely. Any debts must be declared when applying for a mortgage. It is incredibly important, and a legal requirement, to be completely truthful when applying for a mortgage. In addition, the lender’s credit checks will almost certainly identify any debts registered to you, including the debt management plan, if one is in place.

How long after a Debt Management Plan (DMP) can you get a mortgage?

Like most credit issues, the longer ago the DMP was registered, the better chance of success you’ll have with your mortgage application. Whether the DMP is cleared or not will also be a key factor.

If you have a more recent DMP and are considering whether you can apply for a mortgage, you may be pleased to know that there are a few lenders who will consider applications from those with DMPs registered as recently as 12 months ago, even if it isn’t yet cleared.

The timing of your debt management plan will not only impact your chances of success, it will also be a key factor in the type of mortgage you are offered in terms of the required deposit and interest rate. I can talk you through your options and help you decide when might be the best time to apply for a mortgage with a DMP.

Does your DMP need to be cleared before you can apply for a mortgage?

No. If your DMP is cleared before applying for your mortgage, or on track to be cleared before completion, this will greatly improve your chances of success. Many lenders won’t consider a mortgage until your DMP has been cleared for a few years, while some others will.

If you’ve had a debt management plan for more than a few years and have been paying it off but it is not yet cleared, this can be a positive sign of financial responsibility and will help to improve your chances of success. 

What is the lending criteria for a mortgage with a DMP?

Every mortgage lender will have their own lending criteria for mortgages where a debt management plan is present. Some lenders will only consider applications where the DMP has been cleared for several years, while some are happy to lend to those with a more recent DMP being registered.

The same is true for lending criteria more generally, such as your minimum income, employment status, property type, and criteria around other credit issues not relating to your DMP. 

I work with a wide range of adverse credit mortgage lenders and can quickly match your specific circumstances to a lender’s criteria, ensuring you only apply with lenders where you meet their application criteria, and avoid spiraling into numerous application rejections.

How much can you borrow with a Debt Management Plan?

The key factors in deciding how much you can borrow with a DMP will be your income and affordability. The DMP itself doesn’t typically impact the overall amount you can borrow.

Having a DMP when applying for a mortgage will impact the loan-to-value (LTV) which is the percentage of the property which you can mortgage against, with the deposit making up the rest of the amount.

What deposit will you need for a mortgage with a DMP?

The offered LTV and deposit amount required will primarily come down to the specific circumstance of your DMP, as well as other factors on your application. Generally, the longer ago the DMP was registered on your credit file, the lower the required deposit will be. If your DMP is cleared, this will improve your deposit options.

Different lenders will have their own rules around required deposits for mortgages with an DMP, but the figures below is what you might typically expect to see:

Which lenders can provide a mortgage with a Debt Management Plan?

There are several adverse mortgage lenders who will accept applications from those with debt management plans, each with the own criteria regarding the details of the DMP, such as when it was started and whether it is cleared.

Most mortgage lenders for DMPs will only consider applications which come via a broker, and each have their own lending criteria. For these two reasons, it is always best to get advice from a specialist broker before attempting to apply directly where a DMP is considered, or any major credit issue in general.

Getting a Right to Buy mortgage with a DMP

For those looking to buy their council property through the Right to Buy scheme but have a debt management plan, there are many lenders who will consider their application. These lenders each have different criteria, but generally cover the full spectrum of DMPs in terms of length of time and completed status.

Take a look at our dedicated Right to Buy mortgages with bad credit guide for further information, or get in touch and I can discuss your specific circumstances and let you know whether a lender is likely to accept your application.

Getting a Shared Ownership mortgage with an DMP

Of each of the Government schemes for mortgages, getting a Shared Ownership mortgage with an DMP is the trickiest of all three due to the limited number of lenders who will consider your application, but it is possible.

If you have a DMP and are considering a Shared Ownership mortgage, see our dedicated guide to Shared Ownership mortgages with bad credit, or get in touch to discuss your requirements. If I’m unable to match you with a lender for Shared Ownership, I can still give you an idea of your other options for applying for a mortgage with a DMP.

How a mortgage advisor can help with Debt Management Plans

The role of a mortgage advisor, particularly for applications with DMPs, is to understand the applicant’s situation and match them with the best lender for their circumstances. This requires a full understanding of lending criteria, both around debt management plans and in general.

I have decades of experience in helping those with DMPs to get a mortgage, and ensuring they get the application right first time, as well as getting the best deal available for them. 

For more information or to discuss your application, please call me on 01494 526 400 or complete my online enquiry form today.

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