Getting a Mortgage with a Debt Management Plan: What You Need to Know

If you’re currently in or have completed a Debt Management Plan (DMP), securing a mortgage might feel like a challenge. But rest assured, there are options available to help you achieve your goal of homeownership or refinancing. Whether you’re looking to save money, consolidate debts, or raise a lump sum to clear your DMP, the right guidance can make all the difference.

Can You Get a Mortgage with a DMP?

Yes! Many lenders are open to working with applicants who are in or have been in a DMP, provided you meet specific criteria. For instance, lenders typically prefer your DMP to have been active for at least 12 months with a satisfactory payment history, but there are some Lenders that will consider the case a lot earlier.

Steps to Improve Your Chances of Approval

1. Save for a Larger Deposit:
   A larger deposit reduces the loan-to-value (LTV) ratio, making you a more appealing borrower. While saving during a DMP might not be feasible, once your plan is complete, redirecting payments towards a deposit can improve your chances and secure better interest rates.
2. Maintain Stable Employment:
   Consistent employment in the same field demonstrates financial stability and repayment ability, which are key factors for lenders.
3. Keep Up Repayments:
   Whether it’s your DMP or other credit commitments, timely payments are crucial. Missing payments can harm your credit score and reduce your appeal to lenders.
4. Get on the Electoral Roll:
   Being registered to vote helps lenders verify your identity and address, boosting your creditworthiness.
5. Close Unused Credit Accounts:
   Closing old or unused credit accounts can improve your credit score by reducing the perceived risk to lenders.
6. Track Your Credit Report:
   Regularly check your credit report through agencies like Experian, Equifax, or TransUnion to ensure accuracy and understand what lenders see.
7. Avoid Multiple Credit Applications:
   Repeated failed applications can negatively affect your credit score. Instead, work with a specialist mortgage broker to find lenders likely to approve your application.

Mortgage Options with a DMP

• Remortgaging:
  If you own your home, remortgaging can help you release equity to pay off your DMP or consolidate debts. Keep in mind that high street lenders may be hesitant, but specialist lenders often offer solutions for those with a history of bad credit.  There are also lenders who will consider a remortgage where the DMP will still remain in place.
• Second-Charge Mortgages:
  A second-charge mortgage lets you access equity in your home while keeping your current mortgage intact. This can be an effective way to clear your DMP and gain access to better financial options.

Why Use a Mortgage Broker?

Navigating the mortgage landscape with a DMP can be tricky, but a broker can simplify the process. Here’s how they help:

• Access to specialist lenders and exclusive products.
• Expertise in finding solutions for bad credit situations.
• Assistance with applications and tailored advice.
• Exploration of alternative options, such as Help to Buy or shared ownership.

Key Takeaway

While a DMP might affect your financial profile, it doesn’t have to limit your options. By taking proactive steps and working with an experienced mortgage broker, you can improve your chances of securing the right mortgage for your needs.

Ready to explore your options? Contact us at Clever Mortgages today and take the first step toward financial stability and homeownership.