Customer LoginCan you get a mortgage after a debt management plan?
A debt management plan (DMP) is an informal solution to help clear debts. For people with multiple lines of unsecured debt (such as credit cards or loans) debt management plans combine them into one, manageable monthly payment until the total amount is cleared. It is an extremely effective way to clear debts, but if you want to apply for a mortgage in the near future, there are some things to consider.
Does a DMP affect mortgage eligibility?
Unfortunately, yes, but for somewhat obvious reasons. DMPs are designed for people who are struggling to manage their debts and are therefore considered high risk by lenders. However, this doesn’t make it impossible. Evidence of DMPs stay on a credit file for six years, and can be seen as a red flag to some lenders. But, now more than ever, specialist lenders are viewing applications on an individual basis, instead of conducting standard checks that are the same for everyone. It might be difficult, and you may get knocked back by some lenders, but keep at it because it is possible.
Can I get a mortgage whilst on a debt management plan?
Applying for a mortgage whilst on a DMP is a bigger hurdle and will depend on several factors. Firstly, specialist lenders will check your eligibility on the size and nature of your plan. They will consider:
- How close you are to completing your DMP
- Current financial status
- Credit history
- Proof of income
- The size of the deposit you can offer
- How much you wish to borrow
But more importantly, recruiting an experienced mortgage advisor could help you find a mortgage lender who’s willing to accept your application.
Can I remortgage whilst on a debt management plan?
If you had, or are currently in a DMP, there are options available if you’re planning to remortgage your home. If you have enough equity in your property, some specialist lenders may accept your application, and you may get the opportunity to free some money tied up in your home to clear your DMP. However, you’re unlikely to be accepted by a high street lender so we’d recommend working with a mortgage broker who specialises in bad credit mortgages.
How to improve your chances of being accepted
As we’ve discussed, getting a mortgage whilst on or after completing a debt management plan can be difficult because of the implications on your credit file. However, there are ways to improve your chances of being accepted and proving to a lender you can afford the payments.
Try saving a larger deposit
Given your financial situation or history, you may be asked to provide a larger deposit to make it viable for the lender. This will vary on a case-by-case basis, but this could be up to 25% of the property value.
Don’t miss any repayments
Unsurprisingly, it’s incredibly important to keep up regular payments to your DMP and other credit if you want to secure a mortgage. Missed payments could negatively impact your credit score, even more, increasing your risk value in the eyes of a lender.
Try and secure stable employment
All credit agreements take into consideration your employment status and whether you have the income to afford payments. Moreover, consistent employment in the same field, over a long period of time, will help your application even more.
Make sure you’re on the electoral roll
If you haven’t confirmed your identity or address via the electoral roll, do it as soon as you can. Lenders will check this information.
Keep an eye on your credit report
This is your financial footprint and helps lenders identify if you’re reliable with credit. The better the score, the more likely you’ll be approved.
So, is it possible to get a mortgage whilst on, or after finishing a DMP?
The simple answer is, yes. It is possible to get a mortgage whilst on, or after completing a debt management plan, but it won’t be easy. Do your research, track down an experienced mortgage broker and do all you can to improve your credit score (where possible).
