Getting a mortgage with a Debt Management Plan (DMP)

What Do Lenders Look For When You Have a DMP?

When a lender assesses a mortgage application from someone with a DMP, they will look at a range of factors beyond the DMP itself. The key factors lenders consider are how long ago the DMP started and whether it is still active or completed, whether you have kept up with your DMP repayments consistently since it began, the total value of the debts included in the DMP and how much remains outstanding, whether there are any additional adverse credit markers on your file such as defaults, CCJs or missed payments alongside the DMP, the size of your deposit — a larger deposit significantly improves your chances as it reduces the lender's risk, your current income and employment stability, and your overall affordability — whether you can comfortably meet the proposed mortgage repayments alongside any remaining DMP commitments.

Specialist lenders are also interested in understanding the circumstances that led to the DMP in the first place. A one-off event such as a period of illness, redundancy or relationship breakdown that is clearly in the past is viewed more favourably than a pattern of ongoing financial difficulty.

How Much Can You Borrow with a DMP?

The amount you can borrow will depend on your individual circumstances, your income, and the specific lender's criteria. Lenders who consider DMP applications tend to apply more conservative affordability calculations than mainstream lenders, and they will factor in any remaining DMP repayments as a committed outgoing when assessing what you can afford to borrow.

If your DMP is still active, some lenders will require it to be included in your affordability calculation — meaning your monthly DMP payment is treated in the same way as any other debt commitment and reduces the amount they are willing to lend. Others may be more flexible, particularly if the DMP balance is low and close to being repaid. A specialist broker will be able to give you a realistic indication of your likely borrowing capacity before any application is made.

How Much Deposit Do You Need for a DMP Mortgage?

A larger deposit significantly improves your chances of securing a mortgage with a DMP. Whilst some specialist lenders will consider applications at 85% to 90% LTV from borrowers with adverse credit, having a deposit of at least 15% to 25% will open up more lenders and more competitive rates.

The deposit requirement varies depending on the severity and recency of the credit issues on your file. A recently completed DMP with no additional adverse markers is likely to require a smaller deposit than an active DMP with accompanying defaults or CCJs. Your broker will advise you on the minimum deposit likely to achieve approval with the lenders most suitable for your situation.

How Does a DMP Affect Your Credit Score?

A DMP itself is not formally registered on your credit file as a single entry in the way that an IVA or bankruptcy is. However the events that typically accompany a DMP — missed payments, defaults and reduced payment markers — are recorded individually and each has its own impact on your credit score.

Defaults associated with DMP debts will remain on your credit file for six years from the date the default was registered, regardless of whether the debt has since been repaid. This is why the date of the original default matters as much as the date the DMP was completed when assessing mortgage eligibility.

It is worth obtaining a copy of your full credit report from all three main credit reference agencies — Experian, Equifax and TransUnion — before making any mortgage enquiries. This gives you and your broker a clear picture of exactly what lenders will see and allows the application to be positioned in the best possible way.

How Long After a DMP Can I Get a Mortgage?

There is no fixed waiting period that applies across all lenders. Some specialist lenders will consider applications while the DMP is still active, provided repayments are up to date. Others require the DMP to have been completed for at least one to three years. The further into the past the DMP falls and the cleaner your credit history since then, the more lenders will consider your application and the better the rates available to you will become.

DMP Mortgages and Right to Buy

If you are a council tenant looking to purchase your home through the Right to Buy scheme but have a Debt Management Plan, there are lenders who will consider your application. The Right to Buy discount effectively acts as a deposit in many cases, which can help offset some of the risk concerns lenders have around DMP applicants. Speak to our advisers if you are in this situation as it requires careful handling to find the right lender.

Can I Get a Mortgage with a DMP and Bad Credit?

Yes, though the combination of a DMP alongside other adverse credit markers such as defaults or CCJs makes the application more complex. It does not make it impossible. Specialist lenders assess each case on its merits. The key factors are recency, severity and what has happened to your finances since the problems occurred. Our advisers deal with complex adverse credit cases regularly and will give you an honest assessment of where you stand.

Applying for a DMP Mortgage Through a Specialist Broker

The single most important thing you can do when applying for a mortgage with a DMP is to use a specialist broker rather than approaching lenders directly. Most lenders who will consider DMP applications only accept them through brokers — they do not deal directly with borrowers in this situation. Approaching lenders directly means you are likely to be declined before you even reach the right lender, and each declined application leaves a hard search footprint on your credit file that makes subsequent applications harder.

A specialist broker knows which lenders will consider your specific combination of circumstances — active or completed DMP, deposit size, income, any additional adverse markers — before any application is submitted. This means the application goes to the right lender first time, maximising your chances of approval and protecting your credit file from unnecessary hard searches.

At Premier Mortgage Services we have over 30 years of experience helping borrowers in complex financial situations find the right mortgage. We have access to specialist and adverse credit lenders not available directly to the public, and our advisers will present your case in the strongest possible way. Call us on 0115 9499988 for a free, no-obligation conversation.