Debt Management Plan (DMP) Mortgage Advice

Can You Get a Mortgage When on a DMP?

Being in debt can be stressful, and one of the biggest concerns people have is whether or not they will be able to get a mortgage. The good news is that it is possible to get a mortgage even when you are on a debt management plan (DMP).

Every situation is different, so it is important to speak with a mortgage broker to discuss your options and chances of approval. Getting a mortgage with a DMP is unlikely to be possible with a mainstream lender, and mortgage brokers have access to specialist mortgage lenders who could help.

At Echo Finance, our mortgage advisors are experienced in helping people with a range of financial situations, including those on a DMP. We can assess your circumstances and provide you with tailored mortgage advice to help you find a mortgage that meets your needs.

To speak to one of our mortgage brokers about getting a mortgage with a debt management plan, give us a call on 0800 093 4914.

What is a Debt Management Plan (DMP)?

A DMP is an informal arrangement between you and your creditors to repay your non-priority debts over an extended period of time. This type of repayment plan can last anywhere from a few months to several years.

Non-priority debts are typically unsecured debts, such as credit cards, personal loans, and store cards. These types of debts are not secured against an asset, such as your home. They do not include other debts such as council tax, child maintenance, or utility bills.

One of the main benefits of having a Debt Management Plan is that it can help to lower your monthly payments. This can make it easier to keep up with your payments and avoid defaulting on your debts.

Does a DMP Affect Your Credit Rating?

Yes, a DMP will appear on your credit report and may negatively impact your credit score. However, as you make regular payments under the DMP, your credit score should improve.

Do Debt Management Plans Affect Your Chances of Mortgage Approval?

The first and possibly the biggest barrier to getting a mortgage while on a DMP is the effect it will have on your credit score. If you have already missed monthly payments or gone into arrears, your credit score will likely be lower than someone who has been making their payments on time.

Mortgage lenders will check your credit report as part of the application process and may be hesitant to approve your loan if they see that you are on a DMP. High street lenders in particular are often unwilling to lend to people with poor credit scores.

That being said, there are some specialist lenders who are willing to work with borrowers with a poor credit history or current credit issues. These lenders often require a larger down payment (sometimes as much as 30%) and may charge a higher interest rate.

Another factor that will affect your chances of getting approved for a mortgage is the amount of debt you have. If you have a large amount of debt, it may be more difficult to get approved for a mortgage. This is because lenders will view you as a higher-risk borrower.

If you have a small amount of debt, or if your debt is manageable, your chances of getting approved for a mortgage are much better.

While having credit issues will make it harder to get approved for a mortgage, it is still possible with the right lender. The key is to work with a mortgage advisor who has experience helping people with low credit scores get approved for a mortgage.

Bad Credit Mortgages

If you have bad credit, there are a few different types of mortgages that may be available to you.

One option is what’s called a “bad credit mortgage”. This is a mortgage specifically designed for people with poor credit scores. These loans often come with high interest rates and may require a larger deposit than if you had an exemplary credit score. These mortgages are not available from high street lenders but can offer a lifeline to people applying for a mortgage with a debt management plan.

To apply for a bad credit mortgage, it's best to work with a specialist bad credit broker. They will have access to a wider range of lenders and products and can help you find the best deal.

Mortgage Deposits When You're in Debt

Most lenders require a deposit of at least 5% of the property’s purchase price, and if you're applying with a bad credit mortgage lender, this deposit could be as high as 30%.

For many people, saving up for a mortgage deposit while also trying to repay their debts can be a challenge. There are government schemes like Shared Ownership and Right to Buy that can help you to raise the funds for a deposit, but these are not available to everyone.

If you do have a deposit saved, it's worthwhile taking professional mortgage advice to help determine whether it's better to use this money to pay off your debts or to put it towards a mortgage deposit.

Making repayments on time each month is essential to improving your credit score, and eventually, you may be able to qualify for a standard mortgage with more favourable terms.

Will My Debt Count Against Me in a Mortgage Application?

This would depend on the mortgage lender but it’s quite likely it could.

Your mortgage lender will want to know about your current financial situation, including your income, debts, and any other financial commitments you have. They’ll use this information to assess your affordability and decide whether or not to lend to you.

If you’re currently in a debt management plan, your monthly repayments will be taken into account when your specialist lender assesses your affordability.

It’s important to remember that each mortgage lender is different, and some may be more willing to lend to people in debt than others. It’s important to compare a range of mortgage deals to find one that best suits your individual circumstances.

Professional mortgage advice is essential when you’re in debt and looking to apply for a mortgage. A mortgage broker can help you to understand your options and find a mortgage that’s right for you.

Can I Remortgage for Debt Consolidation?

If you’re a homeowner, you may be able to remortgage your property to consolidate your debts into one monthly repayment.

This can be a good way to make managing your finances easier, as you’ll only have to make one payment each month instead of several. It can also potentially save you money, as you may be able to get a lower interest rate on your mortgage than you’re currently paying on your debts.

However, it’s important to remember that remortgaging is a big financial decision, and it’s not right for everyone. You should speak to a professional mortgage advisor to see if remortgaging is the right option for you.

If you do decide to remortgage, it’s important to shop around and compare a range of deals to find the best one for you. It’s also important to make sure you can afford the new monthly repayments before going ahead.

Speak to an Expert

At Echo Finance, we're a whole of market mortgage broker which means we can find you a mortgage from the whole market, even if you have adverse credit. We understand that everyone's financial situation is different, and we'll give you impartial advice to help you find a mortgage that suits your individual circumstances.

If you're struggling with debt, we can help you to find the best way to consolidate your debts and improve your credit score. We'll also help you to find a mortgage that's right for you, whether you're a first-time buyer, looking to remortgage, or self-employed.

To speak to one of our expert mortgage advisors, please call us on 0800 093 4914 or make an enquiry online.