Mortgages with a Debt Management Plan

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Mortgages with a Debt Management Plan
Mortgages with a Debt Management Plan

Mortgages with a Debt Management Plan

People often come to us because they worry about how credit problems and prior debt will affect their ability to buy a home. With the right advice, you can find a mortgage with a Debt Management Plan that will work for you.

What is a Debt Management Plan?

A Debt Management Plan is a way of getting on top of your debts and gradually paying them back. You work with a debt expert to set it up, and it splits a single monthly payment between your creditors.

Debt Management Plans most commonly help people manage priority debts on loans, credit cards and finance plans.

How much does a Debt Management Plan cost?

Some providers charge a fee to set up your Debt Management Plan, while others are free. It’s therefore a good idea to explore various options to make a choice.

A plan is usually more affordable than paying back each debt individually, but generally it will take you longer to clear the debt.

Will a Debt Management Plan affect my credit file?

Yes, usually the organisations you owe money to will inform the credit agencies about the debt, so it’s likely to appear on your credit record. While you are still repaying the debt you could find it difficult to get credit.

Credit issues stay on your file for six years, so it will still be there even after you have completed the plan and repaid the debts.

While Debt Management Plans are fairly serious, they do prove that you are addressing your debts. A debt against your home is more negative than missed credit card or finance payments.

Will anyone lend to me with a Debt Management Plan?

Adverse credit can make it more difficult to find a mortgage, and some high street lenders won’t accept people with a Debt Management Plan.

But many lenders will look into the details of your credit issues, rather than the general credit score. If you have completed all your DMP payments, and have stayed in credit since, some specialist lenders may well be happy to offer you a bad credit mortgage deal.

It’s easier to find mortgages if you can put down a larger deposit – around 20% or more makes a big difference to your choice of lenders and products. Paying more up front also reduces the monthly repayments on your mortgage.

Speak To An Expert

We provide professional, friendly and accessible advice and support throughout the mortgage application process, and are able to offer recommendations and referrals to trusted conveyancing and estate agent colleagues too.

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

If your Debt Management Plan is still running, stick to it rigorously and make every payment on time. Once you have repaid all debts, you will need to stay within all limits, avoid going overdrawn and pay all bills on time.

Applying for small amounts of credit can actually improve your credit rating, and special credit cards are available for that purpose. But avoid applying lots of financial products – too many requests in a short space of time can actually damage your credit score.

What are the eligibility criteria for a mortgage with a Debt Management Plan?

Mortgage criteria are different for every lender, but for a Debt Management Plan mortgage you may need to put down a certain level of deposit, meet various affordability requirements and have been in permanent employment for a certain length of time.

A big advantage of working with a Mortgage Broker is that we will assess mortgage criteria on your behalf, and only put you forward for mortgage deals that will accept you.

Are there any home ownership schemes I can apply for?

There are several Government Home Buying Schemes that are designed to make it easier to get on the property ladder. Generally, if you can get a mortgage, you should be able to take advantage of these schemes.

How can Mortgage Broker Services help me?

Seeking expert advice is the best way to understand your mortgage options. We know the lenders who are most likely to accept your specific situation and will support you step-by-step from seeing whether you are in a good position to buy a home, to applying for a mortgage deal.

To find out more about how we can help you, contact us today.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.