Mortgages after a Debt Management Plan

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Mortgages With A Debt Management Plan 

Applying for a mortgage when you’re paying off outstanding debts through a Debt Management Plan (DMP) may be a daunting prospect. 

You know you can afford the repayments on a mortgage and have the deposit ready, but you’re worried your mortgage application will be rejected.

You may struggle to secure a mortgage from a high street lender, due to credit problems you’ve had in the past. However, there are specialist mortgage lenders that will lend to clients who have an adverse credit rating.

Getting help from a regulated Mortgage Broker at this point is key as risking rejection from a lender will affect your credit rating even more.  

What Is A Debt Management Plan?

If you have credit issues, where you owe money to a number of companies, a Debt Management Plan will help you clear your debt in affordable monthly payments.

Debt Management Plans are set up through debt management companies that act on your behalf to repay unsecured debt on phone contracts, credit cards or store cards.

They will work with you to create a budget that includes all your household and personal expenses. Then they will then calculate the amount left over from your income for debt repayment.

Your DPM company will contact your creditors on your behalf to put your debt management plan into action. 

You pay your DPM company the agreed amount each month, and they distribute it equally to each of your creditors.

How Much Does A Debt Management Plan Cost?

Some debt management companies charge a fee to set up your plan, plus a handling fee for making payments on your behalf.  

Other debt management companies are set up as charities and will help you free of charge, such as the charity Step Change. 

Always choose a debt management company that is regulated by the Financial Conduct Authority (FCA) and is registered in England.

Will Anyone Lend To Me With A Debt Management Plan?

As explained earlier, there are lenders that specialise in ‘bad credit’ mortgages and mortgages with a DMP. 

When a lender receives a mortgage application from your Mortgage Broker, they will examine your income and expenditure, taking your DMP payment and term into consideration. 

If your DMP has been running successfully for some time, your mortgage application will be viewed in a good light.  They will also look at the price of the property you would like to purchase. 

If the monthly mortgage payments will be less than your rental payments, that could be seen as another way to reduce your expenses.

An experienced Mortgage Broker will help you choose a lender offering the most value for money.  You may need to put down a larger deposit to secure the best interest rate.  

Will a Debt Management Plan affect my Credit File?

Even though your DMP won’t appear on your credit file, the debt you owe will remain on your credit record for six years. 

However, your creditors have agreed to your repayment plan, they should add a flag on your record to show a payment arrangement is in place. 

How do I improve my credit score if I am on a Debt Management Plan?

It is possible to clean up your credit file by proactively working on improving your credit score.

  • make sure any old repaid debt is removed from your credit record
  • ask your creditors to update their records when you’ve repaid a debt
  • make sure your name and address is correct on the Electoral Roll
  • never miss a bill payment by setting up direct debits or standing orders 

How can a Mortgage Broker like Better Financial Services help Me?

As experienced Mortgage Brokers you will benefit from our many years of experience and knowledge of the UK mortgage market. 

If you’ve had credit problems in the past and are actively repaying your creditors through a Debt Management Plan, we can help you secure the mortgage you need to buy the home you want.  We will:

  • discuss your financial situation so we can understand how best to advise you
  • reduce your risk of rejection by completing your mortgage application with you
  • submit your application to the lenders we know will welcome your application
  • liaise between you and the lender and keep you informed every step of the way
  • save you time and frustration you’d experience if you approach your application alone
  • save you money by researching the most favourable interest rates and deposit percentages

All it takes is a phone call to get things moving.

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Think carefully before securing other debts against your home.

Mortgages after a Debt Management Plan
Mortgages after a Debt Management Plan

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