What is a Debt Management Plan?

A debt management plan (DMP) is an agreement between yourself and your creditors to help you pay your debt off. It is usually set up by a third party organisation, for example a charity or debt managed company.

You will need to tell your chosen charity or debt managed company the debts you owe and they will help put together a budget. They will typically prioritise the debts which will affect your credit score. Usually you just make a payment to your DMP provider and they will pass it on accordingly to your creditors.

Debt management providers also make sure that your DMP will not affect key outgoings such as your rent or mortgage payments. They will take all of your finances into account when setting up the plan.

Can I still get a Mortgage with a Debt Management Plan (DMP)?

You can still get a mortgage even if you are on a debt management plan, but it will be more difficult. Lenders tend to favour borrowers who have a good credit score as it shows they can handle their money.

Lenders do however understand that sometimes debt cannot be helped and there are options available to you. It is important that you keep up with the monthly payments on your DMP for at least six months. The lender will look to your DMP provider for evidence that you have been paying your debts off for a satisfactory amount of time.

Lenders will look into your credit file and into all of your financial history. This includes outgoings and any credit cards you have taken out.

The type of mortgage that you will get will greatly depend on how much debt you have and how long it is estimated you shall have it for. Whether it is a high street lender of a specialist lender, they will also want to know what your debts are related to.

Different lenders have different criteria so you will need to search the mortgage market to see what options you have. It would be worth seeking expert advice from a Mortgage Broker as they will be able to give your mortgage advice.

If you have taken out a DMP as a result of a payday loan, it will be even more troublesome to find a mortgage. Getting a mortgage after a payday loan is very hard and they should be avoided as much as possible for a good credit score.

How Much Will I be Able to Borrow?

Typically you will be limited to four times your annual income; however, it is possible to access up to five times if you have no other credit issues and can provide a bigger deposit. Lenders will also look into your DMP and work out what you can afford to pay. As you are a high-risk borrower the interest rates are going to be higher too.

Lenders will also look into your income, if you are self-employed or a contractor, you may find it more difficult to be accepted onto a mortgage. This is because of the complexity of proving your income.

Thankfully there are a lot of specialist DMP mortgage lenders who have flexible and unique policies and will accept mortgage applications that are a bit more awkward. It is just important to make sure you are keeping up with your outgoings to boost your chances.

How Can A Specialist Mortgage Broker Help?

At Bespoke Mortgage & Finance Centre we can help guide you to the right mortgage for your specific situation. You can expect that as you have debt, lenders will be harder to find on your own. We have built relationships with mortgage lenders and can help you apply for a mortgage.

They will take control of the paperwork and let you know exactly what you will need to provide for the lender. If you have credit problems it is even more advisable to seek advice as there are specialist lenders out there, regulated by the financial conduct authority, who have bad credit mortgages available.