What is a Debt Management Plan (DMP)?

A debt management plan is when you make an informal repayment arrangement between you and anyone you owe money to for non-priority debts. They are arranged and handled by a DMP Practitioner. All of your debts will be negotiated by them on your behalf, once this has been done, you’ll make regular monthly payments directly to them. They will then pay your creditors the agreed monthly amount and might possibly charge a fee. Fees might be an arrangement fee and a handling fee for every monthly payment. There are three main DMP companies, National Debt line, Step Change and Pay plan. 

DMPs are not legally binding and can be cancelled at any time. This allows you to be free to take out new lines of credit if you so wish. Like with anything, if you do not keep up your monthly repayments, lenders are less likely to lend to you.

What is classed as a non-priority debt?

Non-priority debts can be anything from store and/or credit cards, loans, and other credit agreements, such as a mobile phone contract. To have a DMP you need to be able to afford your rent or mortgage, council tax, utility bills and other living costs, plus a contribution to your non-priority debts.

Mortgages for people on a Debt Management Plan

It may be more difficult for you to get a mortgage if you are on a DMP. There are specialist lenders who lend to customers with past credit problems and are often more willing to look at your overall financial circumstances and assess your application on an individual basis, rather than automatically declining the mortgage outright.

There are fewer mortgage options if you have an active or completed DMP. Fear not, there are many lenders in the market who specialise in providing mortgages designed for people who’ve had credit problems, this is where we come in. We have access to many of these that may not be available on the high street.

Can I pay my DMP off early?

Absolutely; If you are able to pay more each month, or if you should come into some money that allows you to pay it off in one go, then that is definitely to your advantage. Some creditors may be willing to accept an offer if you’ve been paying for six months or more.

Can I remortgage with a DMP?

Yes, you can remortgage with a DMP, however there are a few things to consider such as using your remortgage to consolidate your debts and reduce/clear your DMP – which is an option. Always ensure you are in a good position when it comes to remortgaging, such as owning a good percentage of your home and choosing a time when the property is worth more than when you bought it.

When remortgaging take into consideration that you need to pass affordability checks. A lender will take into account how much debt has been covered by your DMP. Your current lender doesn’t have to guarantee your remortgage. Choosing a specialist lender could improve your chances and this is where we can help as we have an array that aren’t available on the high street.