Why is it difficult to get a mortgage with Debt Management Plan?
Yes, you can still get a mortgage with a debt management plan, and New Start Financial helps to arrange these mortgages daily.
A debt management company agrees with your creditors to pay a reduced amount each month in line with what you can afford. You then pay this amount to the debt management company and they then pay your creditors usually after taking out a fee. Debt management plans are often used when you can no longer meet your commitments, very often through a change in your circumstances resulting in a reduction of your income. A debt management plan is designed to do one thing– lower your monthly commitments. Although this is beneficial in the short term it will inevitably mean accounts falling in arrears, often leading to defaults.
Being in a debt management plan or having been in a debt management plan will restrict your options as even some of the specialist Lenders will not lend when you have been in a debt management plan (DMP). High street lenders are unlikely to consider an application from you if you have been in a debt management plan within the last 6 years. However, there are specialist lenders who will consider an application from you when typically debt management plan (DMP) payments have been made as due. You are likely to need at least a 15% deposit though 10% may be possible.
What are the main criteria lenders consider when applying for a mortgage with Debt Management Plan?
The main criteria are: your current income and ability to pay the mortgage, your credit history and deposit/equity.
How you have met your DMP payments and other adverse credit issues such as CCJs, defaults, late payments, arrears, IVAs or bankruptcy will also affect your application.
The income and affordability requirements for the specialist DMP mortgage providers differ to that of the mainstream and High Street Lenders, in that their maximums tend to be smaller though this differs from lender to lender.The deposit required for a mortgage with a DMP will vary depending on your overall situation and which lender is most appropriate for you.
You could be eligible for the government help to buy scheme where the Government will contribute 20% of your deposit and you just 5%. For a standard mortgage you are likely to need a 15% deposit though in some circumstances 10% could be possible.
I want to apply for a mortgage with Debt Management Plan – where do I start?
A good broker will be able to navigate the various options available to you and find the right solution for you.
Why use a specialized broker?
Sub-prime mortgages are mortgages for borrowers that don’t fit standard criteria and need a little more help in finding the right solution. Prior to 2008 ‘bad credit mortgages’ were supplied by specialist lenders and less severe problems were very often catered for by High Street Lenders. Following the credit crunch specialist lenders almost disappeared from the market and High Street Lenders appetite for risk disappeared, so for a number of years applicants with special needs really had no options.
Now though whilst the High Street stays firmly in the camp of credit score lending there are a number of specialist or niche lenders who actively want to lend to clients with failed credit score issues and borrowers with minor problem or ‘near prime’ all the way up to more severe problems such as having defaults, CCJ’s, pay day loans, missed payments, debt management schemes and bankruptcies.
A good specialist broker can help you find the best solution for you based on your circumstances – if your credit score is damaged they can help find you a lender who is right for you even if you have been declined by a high street lender. A good broker will have an in-depth knowledge of the market and they will be able to recommend the most suitable mortgage for you minimising the risk of your application getting rejected.
Specialist Mortgage Adviser
To find out exactly what you're eligible for and at what rates please give me a call on 03456 123835 or fill out a quick enquiry form here.