Can You Get a Mortgage with a Debt Management Plan?
What’s a Debt Management Plan (DMP) and How Does It Work?
A Debt Management Plan (DMP) is basically a way to get on top of your non-priority debts. It’s an informal agreement where you make one affordable monthly payment, and a DMP provider splits it among your creditors. Companies like StepChange, National Debtline, and PayPlan offer free DMP services.
The good thing? It’s not legally binding. You can cancel anytime, and you’re still able to apply for new credit. But, if you miss payments, your credit score could take a hit, making things trickier if you’re trying to get a mortgage.
What Kind of Debts Can Go Into a DMP?
DMPs cover non-priority debts, which means the ones that won’t lead to losing your home or essential services if you miss payments. These include:
- Credit Cards – Outstanding balances you’re struggling to clear.
- Store Cards – Just like credit cards but tied to specific shops.
- Personal Loans – Unsecured loans from banks or lenders.
- Overdrafts – Negative balances in your bank account.
- Catalogue Debts – Buy-now-pay-later schemes.
- Mobile Contracts – Unpaid phone bills.
To qualify for a DMP, you’ll need to be able to cover your rent or mortgage, council tax, utilities, and living expenses, plus your DMP payment.
Can You Actually Get a Mortgage While on a DMP?
Yes, you can. It might not be as easy as if you had a squeaky-clean credit file, but it’s definitely doable. It mostly depends on whether your DMP is active or completed.
How Do Lenders See an Active DMP?
Mainstream lenders might be cautious, but there are specialist lenders who’ll look past your credit history and focus on your current situation. Here’s what they usually check:
- Payment History: Are you keeping up with your DMP payments?
- Affordability: Do you have enough left after bills and DMP payments?
- Credit Score: A low score isn’t always a dealbreaker, but a better one helps.
- Deposit Size: A 15%+ deposit can make a big difference.
What Happens After You’ve Finished a DMP?
Once your DMP is done, lenders become much more flexible, especially if you’ve kept your finances in check. They’ll want to see:
- How Long Since Completion: The longer, the better.
- Credit Improvement: Have you rebuilt your score?
- Financial Stability: Are you saving and managing money well?
This is where we can help. We work with specialist lenders who understand life isn’t always straightforward.
Can You Pay Off a DMP Early?
Absolutely! If you come into some money—whether it’s a bonus, inheritance, or savings—you can clear your DMP early. Some creditors might even accept a reduced settlement if you’ve been paying for a while.
Early repayment can:
- Boost Your Credit Score: Paid debts = fewer negatives on your report.
- Save You Money: No more monthly handling fees.
- Improve Mortgage Options: Lenders prefer applicants without active debt plans.
Can You Remortgage If You’re on a DMP?
Yes, you can. Remortgaging might even be a smart way to consolidate debts, including your DMP. But lenders will look at:
- Equity: Do you own enough of your home to make it worth their while?
- Affordability: Can you manage the new payments alongside your other bills?
- Credit History: Are you keeping up with DMP payments?
If your current lender says no, don’t worry. We know lenders who are more flexible and can look at your overall situation.
How Can You Improve Your Chances of Getting a Mortgage with a DMP?
Here are a few tips to boost your approval odds:
- Stay On Top of DMP Payments: On-time payments show you’re responsible.
- Check Your Credit Report: Make sure it’s accurate. Services like Experian and Equifax can help.
- Save for a Bigger Deposit: A 15-20% deposit can tip the scales in your favour.
- Lower Your Debt-to-Income Ratio: The less debt you have, the better.
- Work with a Specialist Broker: Like us! We know which lenders are more likely to say yes.
Does a DMP Affect Your Credit Score?
The DMP itself doesn’t show up on your credit report, but any missed payments or defaults before starting it will. The good news? These drop off after six years, and consistent DMP payments can help improve your score over time.
Once your DMP is finished, you’ll gradually see your score climb as you rebuild your credit history.
Which Lenders Will Consider a Mortgage If You’re on a DMP?
Most high street lenders stick to strict criteria, but specialist lenders are more flexible. They’ll look at:
- Affordability: Can you afford the mortgage with your current expenses?
- Deposit Size: A larger deposit makes approval more likely.
- Payment History: Are you keeping up with your DMP?
At Mortgage Bridge, we work with lenders who understand real-life situations. If you’re in a DMP and want to know your options, we’re here to help.
Final Thoughts: Can You Really Get a Mortgage with a DMP?
Yes, you can! It might take a bit more planning and the right lender, but it’s definitely possible. The key is showing you can manage your finances, whether you’re still in a DMP or have already completed one.
At Mortgage Bridge, we specialise in finding mortgages for people with credit challenges. If you’re thinking about buying, moving, or remortgaging while in a DMP, get in touch. We’ll walk you through the process and connect you with lenders who understand your situation.