As we start a new year, a lot of peoples focus can turn to debt.
It might be a new years resolution to get on top of it or it might be that you over did it for Christmas or a change in circumstances. With that in mind I thought it would be a good idea to look at whether or not you can get a mortgage with a DMP.
Pepper Money, a Mortgage lender who are quite active in the adverse market conducted some research in 2024. They found that around 6% of the adult population were in a DMP. Thats quite a lot of people and so I think it shows why the market is open to helping people in DMPs.
General rules when it comes to Mortgages and DMPs
- Most mortgage lenders want “2 years satisfactory conduct”. In a nutshell, that means 2 years worth of payments being made.
- Most mortgage lenders will allow only 1 DMP per application.
- The majority of mortgage lenders will use the negotiated payment as a commitment.
- Adverse needs to also fit criteria.
Looking at these in more detail, the reason for the first bullet point is that it shows a clear gap between the problem period and applying for a mortgage. It also shows the DMP is working as expected and is affordable.
The second bullet point was something we found out when trying to place an application where each applicant had their own DMPs. It is not widely published but it can be a problem.
Where the DMP will remain, most lenders will use the payment rather than the original commitment amounts. Whilst this is a positive, I make a point of it because not all lenders will do that. It can catch you out if not checked.
With the last point, this is not quite a general rule, but it around for maybe 50-60% of lenders, so this is a little more flexible than the other rules but not massively so.
Looking beyond the general rules
I think in general most people who are looking to get a mortgage when in a DMP will fall within the rules above. Most applicants have a period between setting up the DMP and looking for a new mortgage. We rarely see more than 1 DMP per application and the new agreed payment is obviously a plus point. All in, most people will fall into those requirements.
There are lenders who can consider DMPs which have been in place for less than 2 years. Depending on the lender, some alternate stances we see are:
- Satisfactorily run – ie with no minimum term.
- Minimum 6 months – less than 2 years, which can be a bonus.
- If the adverse is caused by the DMP, then it is fine providing the DMP fits criteria – this can offer more flexibility and be useful to some people especially where you are looking to apply before the 2 years.
Other requirements for a Mortgage whilst in a DMP
Other things that can affect getting a Mortgage whilst in a DMP are:
Your adverse as a whole. As mentioned above, lenders take one of 2 approaches. Either the adverse you have (defaults, CCJs, late payments etc) also need to be within criteria or some lenders take the opposite approach where if they form part of the DMP, in the sense that defaults were caused by the accounts being placed in the plan they can be ignored.
The maximum LTV, typically this will be closer to 85% as a maximum. There are exceptions if you have been in the DMP for at least 2 years. In those cases we might be able to get up to 95% LTV.
If the DMP is ongoing you might find you struggle for normal rates and there could be a 1-2% premium compared to high street rates. But this is difficult to cover off in a post like this and think it is best to just have a chat and let us do some research at the time.
How can Mortgage Success help?
Hopefully you might have gathered from this article that we have some experience when it comes to applying for a mortgage with a DMP.
Here is a DMP Success story of ours from a couple of years ago.
We have been advising on adverse credit for well over a decade now. We have seen adverse lenders come and go. Over the years we have learnt the lenders who are easy to work with and painful to work with. We have success stories with multiple companies for many clients with DMPs.
How can we help? We have helped customers in DMPs many times over, we know what we are doing. Lets have a chat and see if we can help and if you want to work with us to get you your new mortgage.
