Getting a Mortgage with a DMP

Getting a Mortgage with a DMP

Having a Debt Management Plan (DMP) doesn’t mean you’re exempt from getting a great mortgage deal. There are specialist lenders who will consider applicants with DMPs, so you don’t have to wait until the end of your payment plan to consider buying a house.

If you’ve dealt with any of the following, we’d like to see how we can help:

• DMP
• Discharged bankruptcy
• CCJs or defaults
• Credit card debt
• IVA

At Harmony FS, we’re keen to offer you:

• No nonsense, personal advice that will help put you in the best position to buy a house
• Flexible meeting and call times to suit your busy schedule
• Access to the whole of the market and specialist lenders to get you the best deal

Get in touch using the form or call us on 0115 896 9776 to see how we can help you get a mortgage with a DMP.

What Is a Debt Management Plan?

Debt management plans are an agreement between yourself and your creditor(s). The agreement isn’t legally binding such as an IVA. A DMO is normally taken out when an individual is struggling to make the required repayments on their debts. To be able to undertake a DMP, you will need to be able to afford your day-to-day living expenses such as rent, mortgage, household bills, travel costs, etc., and make a contribution to your debts.

DMPs are sorted out and managed by a DMP practitioner, and they will help to negotiate the repayment terms with your creditors. You will typically make your repayments to the DMP practitioner who then spreads the payments out between your creditors as needed. There can be some costs associated with using a DMP practitioner, but it can take a great stress off your life and help you get back in control of your finances.

What’s the Difference between an IVA and a DMP?

It’s worth bearing in mind that a DMP is different from an Individual Voluntary Arrangement (IVA). With an IVA, you won’t be able to take out more credit without permission from the IVA practitioner. With a DMP, you can take out more credit, though a DMP does leave a mark on your credit rating, so you may find it more difficult to get low-interest deals.

The interest on your credit is frozen with an IVA, however, a DMP is subject to changing interest rates, which means you could take longer to fully pay back everything you owe.

IVAs are a legally binding agreement, so if you fail to make the payments, you will risk the consequences. DMPs are not legally binding so you can opt to cancel the arrangement at any time, which isn’t always advisable.

Larger Deposits May Be Needed with a DMP

Lenders may require that you have a larger deposit. This is often a precaution to ensure you are able to afford the monthly mortgage payments and show you are able to manage your income and outgoings. 

Lenders may typically want to see a minimum 15% deposit, but this again can vary on the lender. A larger deposit can result in lower mortgage payments, depending on the lender you go with. A good mortgage advisor will talk you through your options to help you decide. Specialist lenders will have a variety of criteria that can be different from mainstream lenders, so it’s worthwhile exploring a range of mortgages.