Mortgage with a Debt Management Plan

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How much in order are your financial affairs? If you’re currently working through a debt management plan (dmp), you may have assumed that getting a mortgage is out of the question. Your dreams of a home of your own for your family will have to wait. It can seem as if every route is closed, and your life is on hold. The good news is, with the right specialist guidance and support, you do have options to purchase a home. You can obtain a mortgage – and that remains the case whether your debt plan is completed or even still active.

Can I Get A Mortgage With A Debt Management Plan?

This process is a little less straightforward than other mortgage applications, but if you access the right professional support it can be done. There are some key differences, depending on whether your debt plan is paid off, or if it’s still in progress – and as you might imagine, it’s easier to get lenders on board once your debt management plan is complete. That doesn’t mean it’s impossible if you are still working on a debt management plan. Lenders use lots of different factors to make a decision on whether they will extend a mortgage loan to you:

  • The affordability of the loan amount
  • Your income
  • The loan-to-value ratio (LTV)
  • Your credit score

Specialist Mortgage Advice From Think Plutus

Navigating this process can be tricky, and understandably daunting to some. Think Plutus are a whole of market mortgage brokerage, here to help guide you through the process of getting a mortgage when you’re on a debt management plan. Our experienced mortgage advisers have a whole-of-market view, enabling them to find the very best deals at any given time. Our one-to-one advice is tailored to your personal situation, finding the products that best suit your circumstances. You can come and see us or access mortgage advice remotely, for a friendly, accessible service that will give you the keys to a new home.

How Do I Apply For A Mortgage When I’m In Debt?

Most people have some level of personal debt, but this shouldn’t be a barrier to owning your home. It is understandably a little more difficult to secure a good mortgage if you have an active debt management plan, but it can be done.

Many lenders extend a blanket decline to anyone who has been on a debt management plan within the last six years. If you apply everywhere you can, not only are you highly likely to see your application rejected, but you’ll be causing further red flags on your credit score by making multiple applications at the same time.

You may have already decided to use a broker for support, but those with a tied approach – where they are affiliated to a bank or building society and restricted to only their products – will often not be able to help. However, there are specialist lenders out there who will consider applications from those with a less than flawless financial record. Taking advice from a mortgage broker who has prior experience of handling these cases significantly increasing your chances of success.

An experienced mortgage adviser will look at the specifics of your financial situation and give tailored advice. Making a targeted application to a specialist lender who is likely to extend terms to someone on a debt management plan raises your chances of being approved and so being able to purchase your dream home.

Your Loan To Value Ratio

The Loan To Value Ratio (or LTV) is a key factor that lenders will use when making a decision on your application. This simply means the amount of money or ‘equity’ that you can put into the property as a deposit vs the amount you are asking to borrow. The lower the LTV, the more likely a lender is likely to be to extend a mortgage to you, even if you have a debt management plan in place. The higher the deposit you can put into the purchase, the greater the amount of lenders who will give you good terms. The exact amount of deposit needed to buy a house when you’re on a debt management plan varies.

Although hard to find, there are some lenders who will offer a mortgage for just a 5 per cent deposit, if you qualify for the Help To Buy Scheme. Help To Buy is a government-backed programme that aims to help first-time buyers onto the property ladder.

In other circumstances, such as if you have received a County Court Judgement (CCJ) or you have serious loan defaults, you are more likely to need 15 to 20 per cent to put into it.

The specifics really do depend on your personal circumstances, and the best place to start is with your credit record. Our expert mortgage advisers can help you decode your credit record and see what lenders see, to be able to judge what deals you’re likely to have access to.

Home Ownership After Bad Finances

If you’ve completed a debt management plan, no doubt you will have learned a lot about looking after your financial health. There are different levels of complexity when assessing an application. If you’ve also had issues with being declared bankrupt, going through an IVA (Individual Voluntary Agreement) or previously had a home repossessed, there is a lot at stake.

The key to navigating this lies in your credit record. This detailed file not only contains a credit rating score, but also the detailed information lenders seek on amounts borrowed, outstanding amounts, available credit and regularity of payments. This helps them to build a picture of you as a borrower.

Banks, building societies and other lenders are all about assessing risk. They will use the information in your credit file to build up a picture of how much risk they will be taking in lending to you, and if you’ve mismanaged your finances in the past, they will usually assume the same will happen again. Get in touch today for expert mortgage advice, we can make your application to the right lender based on an informed reading of your credit information, and give you a second chance to enjoy your first home.

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