Can I get a Mortgage with a Debt Management Plan?

If you’re on a debt management plan you may think it’s impossible to buy your home with a mortgage. However, there may be a solution. Read more here.

If you dream of one day securing a mortgage and owning a home, then you may feel your debts might prevent you from getting on the property ladder.

Resolving your debts, perhaps through a DMP, is a great idea. However, you might wonder whether choosing this solution might prevent you from securing the home you seek. Although challenging, a debt management plan won’t completely rule out your chances of getting a mortgage.

Getting a mortgage with a debt management plan

When you sign up to a debt management plan, it’s noted on your credit report. This will signify you’ve had problems repaying lenders and, as a result, creditors might be more hesitant than they otherwise would be to approve your application.

Many lenders will also refuse applicants with current debt management plans while others might decline applicants if they’ve had a DMP in place at any time during the past six years.

Although it’s certainly not impossible to get a mortgage during a debt management plan, you’re unlikely to get good deals. You might even have to find a specialist mortgage broker.

Finding a specialist mortgage lender

Going through a general mortgage broker probably won’t pay off and, as a result, it may be beneficial to go through a specialist. When you choose this route, you won’t be wasting precious time filling in applications which may contain strict rules on lending and individuals with poor credit.

Furthermore, if you keep applying for a mortgage in the hope you’ll find a provider willing to accept you, the repeated credit searches from companies may have a detrimental effect on your report and this may make it difficult to source funds in the future.

Realistically, would you get a mortgage now?

Although this sounds like a debt management plan would kill your dreams for a mortgage, realistically, you should consider whether you would get one while still in debt. If you’re struggling to repay your creditors, and missing payments, this information will also be included on your credit report.

Arguably, in this situation, a mortgage provider would be just as likely to refuse your request than they would have if you had a debt management plan. It’s for this reason that, if you want to get on the property ladder, it’s best to wait until you’ve cleared your debts.

Can you get a mortgage after a DMP?

After you’ve cleared your debts, you’ll be in a better position to not only save for a deposit but to also start improving your credit score. Although this might take time, and patience, you should have access to better deals through this method.

Does a debt management plan affect my current mortgage?

If you’re currently got a mortgage, the good news is that a debt management plan won’t directly affect it. However, due to this solution not being legally binding, creditors aren’t prevented from taking court action against you to reclaim debts.

Therefore, in rare cases, your home may be repossessed. If you’re worried about losing your property, it may be more beneficial to consider an alternative solution – such as an IVA.

Need more advice? We’re happy to help

A debt management plan won’t completely bar you from getting a mortgage but may make the process more challenging. If you want more advice on the matter, or to find out whether a DMP is right for you, click the button and one of our advisors will be in touch:

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