Can I get a Mortgage with a Debt Management Plan?

If you’re on a debt management plan to clear unsecured debts and want to buy your own home, it’s important to consider whether buying a home with a mortgage is possible for you.

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 as a first-time buyer. Resolving your debts, perhaps through a debt management plan, may be a great idea to help with your financial circumstances. 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

Although Debt Support Centre does not offer debt management plans, we provide information on debt management. When you sign up to a debt management plan with debt management companies to help with repaying your debt, 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 may not be able to access the best deals and might even have to find a specialist mortgage broker.

Finding specialist mortgage lenders

Going through a general mortgage broker may not 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 a poor credit score.

Furthermore, if you keep applying for a mortgage in the hope you’ll find a mortgage broker 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.

Would mortgage lenders lend you money without a debt management plan?

Although this sounds like a debt management plan would affect your mortgage applications, realistically, you should consider whether you would get one while still in debt. A mortgage calculatorand some additional research on mortgage lenders and types of mortgage may help you to gain more information on this. If you’re struggling to repay your creditors, and missing payments, this information will also be included on your credit report and may may affect your credit score negatively.

Arguably, if you remained in debt rather than using a debt solution, a mortgage broker could be just as likely to refuse your request than they would have if you had a debt management plan to clear your unsecured debts. It is for this reason that, if you want to get on the property ladder as a first-time buyer, it may be best to wait until you are debt-free.

Can you get a mortgage after a debt management plan?

After repaying your debt, you may 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 may have access to better deals when buying a property 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 with debt management companies may not directly affect it. However, due to this solution not being legally binding, creditors aren’t prevented from taking court action against you to reclaim unsecured 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 alternative debt solutions– such as an IVA

Need more advice on your debt management plan or buying a home with a DMP?

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

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