Phone
Request Callback
Author: Carl Shave-Director
Updated on April 11th, 2024

Can I get a mortgage with a debt management plan (DMP)?

You may think that having a DMP, or completing one in the last few years, would prevent you from securing a mortgage deal. However, while a DMP may affect your ability to get a mortgage, it doesn’t mean you can’t get one.

Get in touch for a free initial, no-obligation discussion about your mortgage situation.

Do you qualify?

No credit checks & only takes minutes!

Free initial advice
5 star reviews
Access to the whole market
Established over 25 years
Personal service
Exclusive rates

What is a Debt Management Plan?

A debt management plan (DMP) is a non-formal arrangement to repay debts like mobile contracts, credit cards, and loans. You must still be able to afford essential bills in order to obtain one.

You will need a DMP practitioner to help manage the plan. Some practitioners are free, while others may charge fees. Some free, well-known, DMP practitioners include StepChangePayplan and National Debtline.

DMPs are not legally binding and can be cancelled at any time. However, if you fail to meet payments, it will affect your credit score.

Bad Credit Mortgages - morning coffee in bed

Fill out our quick and easy Bad Credit calculator below. We only require a few details to see how much you may be able to borrow.

NO CREDIT CHECKS!

Can I get a mortgage if I’m currently on a debt management plan?

Applying for a mortgage while on a debt management plan can be challenging, but specialist lenders are available to help. They consider factors like income, outgoings, and credit history. The severity and recency of credit issues impact your approval chances.

In all cases, the more severe and recent a credit event is, the more negative weight it will carry. So, for example, getting a mortgage after a CCJ that occurred 3 months ago will be a lot more difficult than if you had a few missed payments on a phone bill 2 years ago.

A debt management plan shows a willingness to clear debts, which can be a positive factor.

Getting a mortgage with a settled debt management plan

Like all other adverse credit issues, a DMP will stay on your credit record for six years, whether settled or not. It may make it harder to get a mortgage, but it’s easier if the DMP is settled.

To improve your chances of getting a mortgage after settling a DMP, check your credit reports for accuracy.

If any information is incorrect, contact the company responsible and ask them to update the status. They are not obliged to, but if they do it will be a great help. Make sure to copy the letter to the main debt reference agencies – TransUnionEquifax and Experian.

Finally, you could consider taking out a credit card to rebuild your credit score by making timely payments and staying within your budget.

Google Logo
4.99 Stars icon
142 Reviews

How much can I borrow if I have a DMP?

Your credit history will affect the ‘loan-to-value’ (LTV) ratio of a mortgage offer. The LTV is how much you can borrow compared to the market value of the property.

With an active or past DMP, it is unlikely you will be able to borrow at a high LTV ratio like 95%. Lending is likely to be restricted to 85% of the property’s value if you have a history of defaults or CCJs (County Court Judgements).

For example, if you want to get a mortgage on a property valued at £300,000, with an 85% LTV,  you would need to borrow £255,000.

However, if you’ve had a history of less severe credit issues and a few years have passed since these events, you may be able to borrow more.

If you want to get an accurate idea of what you could borrow, get in touch and we will pair you with one of our expert advisers.

Mortgages with a DMP Information

Do I need a larger deposit if I have a DMP?

If you are currently in a DMP, it is very likely that you’ll need a larger deposit. This also applies if you have recently completed a DMP.

As mentioned above, a lender will typically allow a maximum of 85% LTV. Therefore, you will need a minimum of a 15% deposit. However, this is just a rough idea based on your circumstances.

If you are currently in a DMP, as well as a poor credit record, you may be required to provide a lot more.

If necessary, you might be able to try other courses of action to raise funds, such as selling or cashing in assets. The problem here is that if you do this, you may then be under pressure to use that money to pay off debts rather than contribute to a bigger deposit.

How much can I borrow if I have a DMP?

Your credit history will affect the ‘loan-to-value’ (LTV) ratio of a mortgage offer – how much you can borrow compared to the market value of the property. With an active or past DMP, it is unlikely you will be able to borrow at a high LTV ratio like 95%, to make lending more widely accessible. Lending is likely to be restricted to 85% of the property’s value if you have a history of defaults or CCJs (County Court Judgements), so you will be expected to provide a 15% deposit. More serious credit issues might mean a lender will ask for an even higher deposit, to reduce their perceived risk.

Do I need a larger deposit if I have a DMP?

A lender could be likely to ask for a larger deposit, but the issue here is when you are using any disposable income to pay off your debts under a DMP, you will not be able to save any more money for a deposit.

If necessary, you might be able to try other courses of action to raise funds, such as selling or cashing in assets. The problem here is that if you do this, you may then be under pressure to use that money to pay off debts rather than contribute to a bigger deposit for a mortgage. And also, cashing in a financial product linked to life assurance could have other implications. You should always seek sound financial advice as to the future impact of these actions from a financial adviser before doing this.

Can I Remortgage with a DMP?

Many people remortgage their property – staying in the same place but getting a new mortgage on it – to free up cash for various reasons. It could be for home improvements, another large purchase, or perhaps an investment.

Remortgaging can seem attractive for someone with a DHP, as it can provide the opportunity to release enough equity to completely clear – or pay off a substantial amount of – any outstanding debts.

The first thing to remember when remortgaging with a DMP is that your existing lender will still assess your mortgage application in line with their usual criteria. If you do not meet the conditions or credit score that they like, then they are likely to decline your application, even though you already have a mortgage with them.

To apply for a remortgage on a property, you will also need to already own a sizeable portion of it. Time is in your favour here, as you could have purchased your property when the market value was less in the past, therefore needing a smaller mortgage at the time – so your property could have increased in value while the proportion of your mortgage you have paid off will also have improved. If the current value is £300,000, and you have paid £100,000 of a £150,000 mortgage, with your current LTV ratio being 50% it is likely you would be able to release a decent portion of the extra equity.

If you have more recently purchased a home that has not increased much in value, and still have a large portion of the mortgage to pay, then your LTV ratio may be too high for most lenders.

In either case, the lender will focus on affordability, so the size of your debts will be an important factor in their decision.

Getting a mortgage with a settled Debt Management Plan

Like all other adverse credit issues, a DMP will stay on your credit record for six years, whether settled or not, and during this time may affect your credit score and therefore a lender’s decision. You might have difficulty in finding a mainstream mortgage lender who will accept your application. This said, you are more likely to have a lender give you a mortgage with a completed DMP than with one that is still active. Bear in mind that lenders will still have to consider any other adverse credit events on your records when making their decision.

When trying to get a mortgage after you have settled a debt management plan, the first thing you need to do is get copies of your credit reports. Make sure that all the basic details are correct – addresses, dates and electoral roll registration. This last point is important – being registered to vote adds valuable validation to your identity, and will help your credit score. If you are not already registered, we advise you do so ASAP.

The next stage is to check that all the details of credit accounts and debts are correct – the amounts, dates and if they have been settled or satisfied. If anything is incorrect, for example if a debt was fully paid off but not showing as such, or a debt was recorded where it was not the case, then contact the company responsible and ask them to update the status of the debt. They are not obliged to, but if they do it will be a great help. Make sure to copy the letter to the main debt reference agencies – TransUnion, Equifax and Experian.

Finally, take steps to rebuild your credit history by taking out a credit card, using it for regular spending and paying it off on time at the end of the month, or taking out a small loan and similarly keeping up with the regular repayments. It’s a good idea to set up direct debits for all loan repayments, so they always go on time. You just need to ensure you have enough money in your account to cover them.

How do I get a mortgage with a DMP?

It is still possible to get a mortgage, despite having a DMP in place. Specialist mortgage lenders exist in the market catering directly to the needs of people who have experienced financial issues, and who will make decisions based on a wider range of factors.

The best thing to do is to discuss your situation and what you’d like to achieve with a qualified mortgage broker who has direct experience with the ‘bad credit mortgage’ market. Here at The Mortgage Centres, we’ll be able to help you find a provider who understands DMPs and allow you access to deals you will not find on the high street.

Can I remortgage with a DMP?

Yes, it is possible to do so.

Remortgaging with a DMP can help clear outstanding debts, but lenders will still assess you based on their criteria. Typically, they will require you to retain at least 25% equity in the property value to remortgage.

If your property has not increased in value or you have a high loan-to-value ratio, lenders may decline your application.

In either case, the lender will focus on affordability, so the size of your debts will be an important factor in their decision.

SPEAK TO OUR ADVISERS

Specialists DMP mortgage lenders

Using a mortgage broker, especially a bad credit broker, can help you access specialist lenders who are more flexible with their lending criteria. Some of these lenders are not accessible to the public and can only be accessed through brokers or intermediaries.

These specialist lenders adopt a more flexible view of your finances than traditional high street lenders and will consider your overall circumstances rather than just your credit score.

They may be willing to lend to someone with a past DMP, but interest rates may be higher, and a larger deposit may be required.

If you want to know more about your options for obtaining a mortgage while you have a DMP on your file, don’t hesitate to get in touch with our team today and arrange a free, no-obligation initial consultation.

SPEAK TO OUR ADVISERS

Mortgages with a DMP FAQs

  • How long does a DMP need to be set up for to enable me to get a mortgage?
  • Do all my payments to the plan need to be made on time and in full?
  • Can I pay off my DMP early?
  • How long does a DMP stay on your credit file?

This will depend on the individual lender’s own criteria, but it is typically 12 months. You’ll probably be asked to put down a bigger deposit and pay a higher interest rate on the loan.

Lenders always look at affordability when making mortgage offers. If you are already paying off other debts, then they will need to know how you will sustain mortgage payments on top of this.

A dilemma might arise if you have managed to save up a decent-sized deposit – should you use this to pay off your DMP and relieve your ongoing commitments, or it is best used as a down-payment on a property?

A specialist bad credit mortgage adviser will be best placed to tell you what to choose according to your specific circumstances.

This is very important, and the answer is a resounding yes.

A DMP is not legally binding and can be cancelled at any time, but doing so, or being late with payments, will further damage your credit rating.

This said, if you find yourself in financial difficulties because of keeping up with your DMP, then you should contact your DMP practitioner to see if they can help.

Yes, this is entirely possible, and usually desirable.

If your cash flow is healthy enough, or you have come into some money you can use, then you can settle the debts and close the DMP.

Also, if you have been in a DMP for six months or more, you are able to make lump-sum offers to your creditors. They may be willing to accept perhaps 50% of the amount owed if they get that cash immediately.

You can do this with one or more of your creditors, depending on what you are able to pay.

The DMP itself will not appear on your credit record, but the debts still outstanding will.

Creditors paid through a DMP might put a note to this effect on the report, and the accounts that are still technically in arrears will still show as such until the fall out of the six-year scope of a credit check.

A DMP will also need to be disclosed as part of any mortgage application, no matter the status of debts it covers on your credit file.

We'll call you...

"*" indicates required fields

This field is for validation purposes and should be left unchanged.
Proudly working with
… and many more!

Thanks for getting in touch, a member of the team will be in contact shortly.