As part of our “Can I get a mortgage with…” articles, I thought it would be useful to include on with Debt Management Plans or DMPs. We actually get a lot of enquiries for people either currently in DMPs or people who have recently cleared them.
I have struggled with this article as there are quite a few questions we need to ask. These will help to determine what the options are. I will do my best to give an overview but I think if you are looking to get a mortgage with a DMP then it is probably a good idea to have a conversation on the phone.
Mortgage criteria and DMPs
When it comes to applying for a mortgage with a DMP we have to look at a number of things. The big one is the answers to the following questions:
- Is the DMP still in place or has it recently finished?
- What does your credit report look like?
- Who was included in the DMP?
- How much deposit (percentage wise) do you have?
Getting a high street Mortgage with a DMP
High Street lenders vary in their stance on DMPs. Some do not ask about them and rely on how your DMP appears on your credit report. For example they may be looking at the Defaults or the arrears or AR markers.
If they are looking at how your credit report looks then we have to look at their stance on Defaults etc. Usually where a DMP is or has been in place, there are multiple defaults as people generally do not go into a DMP for one or 2 debts. There are of course exceptions to that and some DMPs can last many years, in which case the defaults may have actually dropped off.
Where a DMP has been entered in the last 6 years it is usually quite difficult to get a mortgage with a high street lender. However that does not mean it can not be done.
Specialist mortgage lenders with Defaults
As with Defaults and CCJs getting a Mortgage with a specialist lender where you are in or have recently been in a DMP it is a little easier to determine your options. This is because their criteria is a lot more straight forward. Typically their criteria is black and white so it is easier to see if you fit or not.
Typically these lenders charge higher interest rates, are harder work and take a little longer to get a Mortgage offer. That means it is better all round if we can get you a normal mortgage but where that is not possible these specialist lenders pay a valuable role in helping you get on the property ladder.
Mortgages & DMP Summary
Over the years we have helped many customers who are in DMPs. We have picked up a lot of valuable experience in that time, little things that can catch you out. A good example of this is that many lenders actually only allow one DMP per application. That means if you are a couple and both in DMPs, your application will automatically be declined.
DMPs in practice are not difficult to overcome, but trying to get the better rates and ensuring you do not get declined because of a simple oversight is quite complex. Regardless of whether you use Mortgage Success or not, I think it is important that you find a broker who is experienced as they will be worth their weight in gold.
It is always advisable to get a copy of your credit report upfront (not clear score) so that we can review what is on there. We can see how it appears and give you a more accurate idea of what your options will likely be. Something like CheckMyFile is ideal as it contains all 3 credit agencies. Alternatively you can use the credit agencies directly – Equifax and Experian are the 2 main credit reference agencies.