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While a Debt Relief Order (DRO) could help you write off your debts and give you a fresh start, it can make getting a mortgage in the future more difficult.
A DRO is a formal insolvency procedure that can write off certain types of debt if you cannot afford to repay them. It is designed for people with relatively low incomes and few assets.
Debt Relief Orders (DROs) are a type of debt solution designed for people who do not have the means to repay their debts. If you are successful in being granted a Debt Relief Order, your debts may be entirely written off, and as such there are very strict eligibility criteria that you must meet in order to qualify.
This means that if you own a home, you will not be granted a Debt Relief Order as you could feasibly remortgage, sell or downsize to pay off your debts.
To be eligible for a DRO you must:
- owe less than £30,000
- have less than £75 a month of spare income
- have less than £2,000 worth of assets
- not own a vehicle worth £2,000 or more
- have lived or worked in England and Wales within the last 3 years
- have not applied for a DRO within the last 6 years
If you do not meet all of the above criteria, then you will not be eligible for a DRO and will need to look at alternative debt solutions.
Can I get a DRO if I have a Mortgage?
No, the nature of DROs means that if you have a mortgage you will not be eligible. This is because you could feasibly use your property to raise the funds required to repay your debts, as the limit for a DRO is capped at £30,000.
If you are a homeowner and are struggling to keep up with mortgage repayments as well as other unsecured debts, then a DRO is not the right solution for you. We would recommend you seek professional mortgage advice as there are a number of different options available to you, such as remortgaging, equity release or downsizing.
Is It Possible To Get A Mortgage with a Debt Relief Order?
The nature of DROs means that you are prohibited from borrowing large amounts of money while the debt relief restriction order is in place. This includes taking out a mortgage.
However, once the 12-month debt relief period has ended, you may be able to apply for a mortgage. Although, due to your past financial history, you are likely to face difficulty being approved for a standard mortgage and may need to look into alternative options such as bad credit mortgages.
Can I get a Mortgage After A Debt Relief Order?
When you are facing severe financial difficulties, the thought of taking out a mortgage may seem like an impossible dream. However, it is possible to get a mortgage after a Debt Relief Order, although the process may be more difficult and can take time.
The most important thing to remember is that you will need to demonstrate to lenders that you have changed your financial habits and are now in a position to afford repayments. This means taking steps such as:
- Paying off any remaining debts
- Demonstrating a regular income
- Saving up for a deposit
- Building up a good credit score
If you can do all of the above, then you should be able to apply for a mortgage and be approved by certain lenders, although you may have to pay a higher interest rate. Mortgage lenders will want to see that your credit record has improved before considering you for a mortgage.
It is important to remember that each lender will have its own criteria when it comes to approving a mortgage, and there are a few mortgage providers lending to those with a previous Debt Relief Order. However, the number of options may be limited and you are likely to face difficulties being approved for a standard mortgage.
If you want to apply for a mortgage after a DRO, then we recommend speaking to a specialist mortgage broker who will be able to advise you on the best course of action.
What is a Bad Credit Mortgage?
Bad credit mortgages are a type of specialist finance that can help people with credit issues get their mortgage approved. These types of mortgages are not available from high street lenders, and you will need to approach a specialist provider.
A bad credit mortgage is likely to have a higher interest rate than a standard mortgage, as you will be considered a higher-risk borrower. However, this doesn’t mean that you won’t be able to get on the property ladder, it just might take a little longer to find the right deal for you.
If you’re not sure where to start, then we would recommend speaking to a specialist broker who will be able to help you find the most suitable lenders and mortgages for your circumstances.
At Echo Finance, we have a team of whole-of-market mortgage brokers who have experience helping people with a wide range of credit issues. We can help you find the right mortgage, even if you have been refused elsewhere. To speak to one of our expert mortgage brokers, simply give us a call on 0800 0934 914 or fill in our online enquiry form and we will be in touch.
Can having Bad Credit affect my Mortgage Application?
Bad credit can have a significant impact on your ability to get a mortgage.
Lenders will take into account your credit history when making a decision on whether or not to lend to you. If you have a bad credit report, then this is likely to put many lenders off as it suggests that you have struggled in the past to keep up with repayments and are seen as a higher-risk borrower.
However, there are specialist lenders who are willing to lend to those with bad credit. Although, you are likely to face a number of difficulties when applying for a mortgage, such as:
- A smaller choice of lenders
- Higher interest rates
- A smaller loan amount
- A higher deposit
If you have bad credit and want to apply for a mortgage, then we recommend speaking to a specialist mortgage broker who will be able to advise you on the best course of action.
What is the earliest I can apply for a mortgage after my DRO?
You will need to wait until your Debt Relief Order has been discharged for at least 12 months before you can apply for a mortgage. However, your debt relief order will appear on your credit report for 6 years and most lenders will not want to lend to you while this is still the case.
Once the 12-month period has passed, you may be able to apply for a mortgage with a specialist lender, although you are likely to face difficulties being approved for a standard mortgage.
Once your DRO has been discharged, you will then need to take steps to improve your credit score and financial situation before applying for a mortgage. This includes things like paying off any remaining debts, demonstrating a regular income and saving up for a deposit.
How much deposit will I need?
The amount of deposit you will need after a Debt Relief Order will depend on the mortgage lender you approach. However, most lenders will require a larger deposit than they would for someone with no previous debt problems.
This is because you will be seen as a higher-risk borrower and the lender will want to minimise the amount of risk they are taking on. As such, you may need to provide a deposit of around 20-30% of the
What are the disadvantages of a debt relief order?
Whilst a DRO can provide much-needed debt relief, there are also some potential disadvantages that you should be aware of before applying. These include:
Your credit score will be affected – This means it will be more difficult to access credit in the future, including taking out a mortgage or even signing up for a mobile phone contract.
Your details will be published on the Individual Insolvency Register – This is a public database which anyone can access, and your name will remain for 3 months after your DRO.
Your business activities are restricted – You cannot be a director of a company, create, manage or promote a company during the debt relief period.
If you are considering a DRO, then it is important that you speak to an insolvency practitioner who will be able to advise you on whether this is the best solution for your individual circumstances.
Get Expert Mortgage Advice
If you are considering applying for a mortgage after a Debt Relief Order, then we recommend speaking to one of our expert mortgage advisers.
Our team have a wealth of experience in helping people with bad credit get mortgages and we will be able to advise you on the best course of action. We work with 90+ lenders including those who specialise in bad credit mortgages, so we are confident we can find a mortgage that meets your needs.
To speak to one of our advisers, please call us on 08000 934 914 or make an enquiry online.
Find your local adviser
Frequently Asked Questions
Below you will find the answers to the questions we hear most often from Echo Finance customers:
A mortgage broker, or a mortgage advisor, is an intermediary who acts as a conduit between an aspiring borrower and a lender. It is their job to provide the mortgage applicant with impartial advice, help them choose the right product and arrange the deal with the lender.
Brokers provide services including advice on which type of mortgage to choose, providing access to exclusive rates through their lender contacts, and application support. Some can offer advice on all areas of the mortgage market, while others specialise in niche fields such as buy-to-let, bad credit, commercial finance, first-time buyers or self-employed borrowers.
People choose to apply for their mortgage through a broker because it can boost their chances of finding the right deal, while saving time and money in the long run.
- Residential mortgages: Everything from fixed-rate to tracker mortgages for first-time buyers, homemovers and remortgage borrowers
- Specialist mortgages: For borrowers who fall outside of standard lending criteria, including people with bad credit, self-employed professionals and more
- Later-life lending: Including advice on equity release, mortgages for pensioners and retirement interest only (RIO) mortgages
- Bridging & Commercial: We have specialist advisors on hand for commercial mortgages, bridging loans, development finance and more
- Insurance & Protection: Including life, home and critical illness cover for families and individuals, as well as landlord and business protection insurance
Echo Finance is regulated by the Financial Conduct Authority and is reviewed annually by an independent compliance company. All of our brokers and advisers hold industry-standard qualifications, such as CeMAP, CeRER and DipMap, where required.
We are committed to providing advice through the channels that best suit your needs. Our brokers can provide advice via phone, email, video and web chat from anywhere in the UK, but we also aim to offer face-to-face appointments for those who request them.
