Debt Management Plan Affecting Your Mortgage?
You Need a Specialist Debt Management Plan Mortgage Broker
If you find yourself on a debt management plan (DMP), it’s only natural to worry about how it could affect your mortgage application. However, taking actions to pay off your outstanding debts through a DMP doesn’t mean you’re unable to apply for a new mortgage.
In fact, securing new mortgages for people on debt management plans is one of my specialities.
Drawing upon nearly three decades of industry experience, I’ll help you to prepare your applications, limit the impact of your DMP, and secure the finance needed to purchase your new home.
Debt Management Isn’t Always a Red Flag to Lenders
While your options may be more limited due to your DMP, I will be able to find a mortgage provider who will consider your request. As with all applications, these lenders will be asking themselves one question when we submit your request: “Will this person pay back the money we lend them?”
When it comes to answering this question from mortgage providers, your debt management plan presents you with an opportunity. If you’ve kept up with your monthly repayments for a year or more, you’ll show the bank or building society that you can be trusted to consistently make payments on time.
Once you are established on your debt management plan, mortgage applications can be made to borrow up to 95% of your home’s value. You will also be required to meet the following criteria:
Deposit: While you can be approved for a mortgage of up to 95%, this requires that you have no defaults or CCJs registered in the last three years. With adverse credit, this drops to 85%, meaning you’ll need a deposit of between 5% and 15% of the property’s value.
Credit History: A DMP demonstrates that you have suffered from financial difficulties in the past, but this will only become a serious problem if you have late payments, defaults and CCJs on your file. If this is the case, I will be able to advise you on how best to proceed.
Income: Lenders typically limit the size of your mortgage to around four times your annual income. However, your debt management plan will need to be taken into account as you are committed to regular monthly payments for a period of time. This may lead to you being offered a smaller mortgage.
To discuss the effects of your debt management plans and credit history on your mortgage application, please call me on 01494 526 400.
What About Payday Loans?
Many of the people who come to me asking about the effects of debt management plans on mortgage applications also ask about payday loans. My advice to them is very simple.
Do. Not. Take. Them.
While a DMP may not be an instant red flag for many lenders, multiple payday loans are. They instantly demonstrate that you are unable to prudently manage your finances.
Borrowing money every month for six months, just to keep you going until your next pay day paints you as far more of a risk to mortgage lenders than maintaining a debt management plan over the same amount of time.
Buying a new home while paying off your DMP doesn’t need to be an insurmountable challenge. Call me, Steven Neale, now on 01494 526 400 to discuss a debt management plan mortgage application. I’ll give you the advice you need.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.