Can I get a Mortgage with a Debt Management Plan (DMP)?

Currently being in a DMP, or having completed one recently, will affect your ability to get a mortgage. However, it doesn’t necessarily mean that you’ll not be able to obtain one. Instead, your options in the market will be limited.

There are many specialist lenders available, providing mortgages designed for people who’ve had credit problems. So even if you’ve been turned away by high street banks and building societies, don’t give up.

Do you qualify?

NO CREDIT CHECKS!

An introduction to Bad Credit Mortgages

Can I get a mortgage if I have a DMP?

Yes, it’s possible, but it can be more challenging. Lenders will assess your financial situation, including the severity and timing of any credit problems.

High street lenders tend to rely on your credit score ^[3], which may be impacted by your DMP. However, less serious issues like late payments or small debts may be less of a barrier, especially if they are older entries. Your chances of approval increase if the DMP was resolved some time ago, but lenders will still closely scrutinise your affordability.

If your DMP payments are recorded as defaults, this can further complicate the application process. Additionally, if you have a substantial deposit, you may have already used it to pay off debt, limiting your options further.

For those struggling to find a lender, it’s best to seek professional advice. Expert brokers have access to exclusive deals that aren’t always available to the public, which may increase your chances of securing a mortgage.

DMP Mortgages: Myth vs. Reality

How much can I borrow if I have a DMP?

The ‘loan-to-value’ (LTV) ratio available to you will be affected by your credit history. The LTV is the percentage you’re able to borrow compared to a property’s market value.

With a current DMP or a settled one in the past 6 years, it’s unlikely you’ll be able to borrow at a high LTV. Lending is likely to be restricted to 85%, so you’ll likely require a minimum 15% deposit ^[5].

More serious credit issues might mean a lender will ask for an even higher deposit. This reduces the risk exposure for them.

Are you struggling with affordability and limited lender options?

If you’ve been in a DMP or have faced financial challenges in the past, you might be concerned about affordability and the limited number of mortgage lenders willing to consider your application. However, by taking steps to manage your current financial commitments and improve your budget, you can increase your chances of securing a mortgage at an affordable rate. Here are some practical tips to help you enhance your affordability:

1. Create a Realistic Budget

Start by tracking your income and expenses to get a clear picture of your finances. A well-planned budget can help you identify areas where you can cut back and redirect funds toward savings or paying off existing debts.

2. Cut Back on Non-Essential Spending

Look for opportunities to reduce discretionary spending – things like dining out, subscriptions, or impulse purchases. Redirect the money you save into a dedicated savings account for your deposit or to pay down your existing debts. Even small sacrifices can make a significant difference in the long run.

3. Pay Down Existing Debts

One of the biggest factors affecting affordability is how much debt you already have. Prioritise clearing high-interest debt, as it can have a serious impact on your overall monthly expenditure. If you have loans or credit card balances, consider paying them off or consolidating them into lower-interest options if possible.

4. Increase Your Income

If your current income isn’t sufficient to cover your living expenses and future mortgage payments, consider looking for ways to increase your earnings. This could involve taking on extra work, freelancing, or finding a side hustle. Even small increases in income can improve your affordability ratio and make you a more attractive candidate to lenders.

5. Start Saving for a Larger Deposit

The more you can save for a deposit, the better your chances of securing a mortgage – even with a DMP in your past. A larger deposit reduces the lender’s risk and may help you secure a better deal, including lower interest rates. Aim for a deposit of at least 15–20%, especially if you’ve had credit issues.

6. Be Mindful of Your Credit Utilisation

If you’re using credit cards or loans, try to keep your credit utilisation below 30% ^[6]. This is the ratio of how much credit you’re using compared to your total available credit limit. A lower utilisation rate makes you appear more financially responsible and can improve your credit score over time, increasing your chances of securing a mortgage.

7. Seek Specialist Mortgage Advice

With limited lender options available to those with credit issues or active DMPs, working with a specialist mortgage broker can be invaluable. A broker will be able to connect you with lenders who offer products specifically for people in your situation, improving your chances of approval. They’ll also help you navigate the complex affordability calculations and find the best deal for your financial situation.

Why choose Just Mortgage Brokers for your Bad Credit Mortgage?

• This is our speciality – it’s what we do
• Direct access to lenders underwriters enabling us to discuss your situation in detail
• Exclusive deals available
• Broker only bad credit lenders available to us giving you greater choice
• Unlimited mortgage broker – giving a wide range of lenders at our disposal
• Great customer reviews