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Get a Mortgage during a Debt Management Plan

If you are already a home owner it may be possible to get a mortgage during a DMP. However you will need to use a specialist broker to make your application.

Already in a Debt Management Plan and need help? Give us a call (0800 044 5407) or complete the form below to speak to one of our experts

Can you get a Mortgage during a DMP?

One of the major problems as far as borrowing money during a Debt Management Plan is concerned is your credit rating. As a result of your Plan this will be very poor. In the past this would have prevented you from even being considered for a mortgage. However since the end of the Credit Crunch this situation has changed.

There are a number of mortgage companies who may now consider lending to you despite your debt. The interest rates you will be charged will be slightly higher than those advertised on the high street but they are still sensible. However you will need the help of a specialist broker to apply. Please speak to us and we will put you in touch.

There are some key criteria that you will be asked to meet. The first is that you must have maintained your debt management repayments on time for the past 12 months. If you have missed any payments or received further default notices during the last year you will have to delay your mortgage application. Secondly you will need a deposit. If you are looking to release equity from your current property this might be possible. However as a first time buyer it could be a struggle.

Remortgage to Settle your DMP Early

As a homeowner one of the reasons you may have chosen to use a Debt Management Plan is that you are not legally obliged to release equity from your property to repay your debt. Having said that if you have equity in your property releasing a lump sum to settle unsecured debt can offer a considerable advantage.

Your creditors may well accept a cash sum equal to 50% or less of the total debt in your Plan. If you can raise this amount from the equity in your property it will mean that a significant amount of your unsecured debt is written off and your Plan will be completed far earlier than originally anticipated.

As with getting a mortgage to buy a new house the options for re-mortgaging to release equity have also improved in recent times. As such if you have maintained your Plan payments for the past 12 months this could well be a possibility for you to consider.

Should you pay your Debt before applying for a Mortgage

Clearly one of the options open to you is to put off any thoughts of applying for a mortgage until your Debt Management Plan is over and your debts have been paid. One of the advantages of doing this is that it gives your credit rating a chance to repair so you can get a better mortgage deal in the future.

If you are a first time buyer there are other advantages to completing your Plan before applying for a mortgage. Once this is done you will then be in a position to save much more towards your deposit. The larger deposit you can save the better deal you will be able to get. In addition you will not have the pressure of paying your Plan as well as new mortgage payments each month.

If you are already a home owner you do have a number of options. You might simply want to delay any thoughts of re-mortgaging until your Plan has finished to preserve your equity and get a better deal in the future. Alternatively you will be in a position to pay off your Plan much faster by re-mortgaging and using some of the equity to settle your debt. It may be that the terms of your new mortgage are not so good and your mortgage payments are higher. However a significant part of your unsecured debt will be written off. You can then start to repair your credit rating and move to a better mortgage deal in 2-3 years.

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