Getting a Mortgage with a Debt Management Plan (DMP)

You Can Do It! – Here’s How

The good news

You can absolutely get a mortgage after a DMP is settled or with one currently active – we do this all the time!

It Doesn’t Need To Be Satisfied

You can get a mortgage if your DMP is still active.

The number of lenders who consider settled DMPs is higher than that of active DMPs, so you’ll have a wider choice of mortgage lenders to approach and, typically, access to better deals.

Factoring in everything like your income, affordability, the property, etc., there might be no lenders unless you pay it off, in which case you have a decision to make – wait or repay!

Your best next step would be to chat with one of our amazing team members. They’ll give you certainty about who you qualify with, how much deposit you’ll need, what it might cost, and the maximum you can borrow.

Headline Info You Need To Know

Lenders will want to know the following:

• Is the DMP active or completed?
• When was the DMP started and, if applicable, completed?
• What debts were included in the DMP?
• Have all payments been made on time since the DMP began?
• Has the DMP affected the applicant’s credit score?
• Are there any outstanding debts outside of the DMP?

They are all different in what they do and don’t accept, so the answers will essentially create a shortlist of lenders who can approve you.

Risk appetite can vary significantly between lenders, so there isn’t a one-size-fits-all model for lending criteria on a DMP mortgage.

These are the main areas lenders are looking for:

DMP Date and Status

Timing is everything when applying for a mortgage with a DMP. Different lenders use different criteria about how long they want your DMP to have been active or satisfied. Most mainstream lenders require your DMP to be satisfied and for a set timeframe to have passed, normally between one and three years, but as we’ve mentioned (and you can check it out in our comparison tool) there are plenty of lenders that will consider you before then, if the situation is right.

How well you’ve paid it

Most lenders open to active DMPs require them to have been in place and well-maintained for at least 12 months, as this shows that you’re managing your finances responsibly (and if it hasn’t been running for 12 months, then for as long as you’ve had it).

Suppose you’ve missed payments on your DMP in the last 12 months. In that case, it restricts the number of lenders that will consider you further – some will want you to wait before you apply, a few lenders can be OK with it, but this depends on why it happened and your advisor putting a great case forward, as it may need to be presented in the right way for an underwriter (decision maker) to be happy with it – generally this is a manual process your advisor will take care of.

Deposit Required

This varies as the market changes and how competitive it is, but right now, there are lenders that require a deposit of 5% to 10% if you’ve had a DMP (depending on the date), and more are opening up when you’ve got a deposit of 15% or more.

Check what options are available with an expert if you have a smaller deposit, but generally, putting down a higher deposit can open up more lenders and therefore a better chance of them offering the best rate at the time.

The Impact Of Other Credit Issues

Getting a mortgage with a debt management plan is still possible if you have other types of bad credit, but it can be more complex.

It depends on whether the credit issues are part of the same accounts managed in the DMP, or if these credit issues are in addition to the DMP.

If credit issues are from an account within the DMP – Often if lenders record the credit issues whilst the DMP was active, and you can prove that the issues were in the DMP and you paid on time (sometimes this is lender policy despite it being in a plan), then some lenders will see this as you sticking to the agreement and approve you even if it’s outside their usual policy.

If credit issues are before the DMP or from new accounts not associated with it – New debts that have missed payments or defaults, or historical credit issues not associated with the DMP, can indicate an ongoing mismanagement of finances and deem you a higher risk to the lender. That said, there are still lenders who can consider this, there are just fewer of them, and it depends what the issues were, and when they happened.

This is where a good advisor shows their colours and proves their worth – will they go the extra mile to work this out and get the evidence to ensure you get the deal?

The Actual Process

DMP Mortgage Lenders & Rates

The different lenders that will consider you and the rates they offer will differ depending on your profile, which, as mentioned, hinges on the dates and details of the DMP.

It’s also important to remember that the details around the DMP are not everything a lender will be checking. If it fits their policy and appears in our results, it doesn’t mean they’ll lend; it’s just that your DMP is likely acceptable.

To check out the rates based purely on your DMP, you can do so here in our (AMAZING!) comparison tool. Feel free to do a search from scratch and apply your filters, or use the links to jump in here and edit your search however you like:

• 75 lenders and rates if your DMP was settled over 6 years ago,
• 55 lenders and their rates if settled in the last 3-6 years,
• 25 lenders if you have an active DMP.

DMP Mortgage Calculator

DMP Specific Mortgage Calculator

The OMA® Mortgage Engine powers our calculator, which we own and built using various data sets like Defaqto and Knowledge Bank, combined with our own expert insights from over a decade of specialist experience.

Use the links above or jump to the comparison tool homepage, where you can load it with relevant filters to get the rates and monthly figures from lenders who may consider you.

How much can you borrow

The amount you can borrow will largely be based on your income and outgoings, and the current generosity level of lenders who can accept your profile.

Note: If you still have an active DMP, the monthly payments will be factored into calculations (unless you pay it off before the mortgage starts).

All lenders calculate maximum borrowing differently and have different lending caps. As a general rule of thumb, you can multiply your annual income by 4 to get a rough idea, but some can go beyond 5x income, even with the DMP.

🧮 Try our calculators to get a rough idea of your maximum borrowing.

A Basic Understanding Of DMP And Mortgages

What Is A Debt Management Plan (DMP)?

A debt management plan is an informal, non-binding agreement between borrowers and their lenders, set up for people who have trouble repaying their debts.

It’s typically for unsecured debt such as credit cards, personal loans, and store cards. It’s set up by a central DMP provider who contacts all your providers and negotiates a monthly payment to pay it all off over time.

Someone in a DMP would then pay the provider one payment, which is divided among all the creditors and paid out by them directly.

DMPs can be edited or cancelled at any time, and have no fixed minimum payment amount other than that which has been agreed – that doesn’t mean making payments is not essential, of course – your existing lenders will still be reporting back to the credit reference agencies. Any new lenders will review your DMP conduct as a massive indicator of your creditworthiness, even if you entered it a few years ago.

How It Shows On Your Credit File

Since these agreements aren’t “formal” or legally binding, they typically don’t appear on your credit report (although some lenders might register you as having “made an arrangement to pay”, showing as “AR” on your credit report).

You may also notice that the monthly payment agreed against the account is the original payment amount, and the payment recorded is lower than this (as per the terms of your agreement). This kind of activity impacts your credit score.

DMP Impact On Different Mortgage Types

It doesn’t tend to matter too much to lenders whether you are a first-time buyer, a home mover, or remortgaging. The important thing is that you have the deposit and can afford it, and that the lenders are willing to consider the DMP and any relevant other credit issues.

Lenders may require first-time buyers with a DMP to have a larger deposit than other types of buyers, but this isn’t a common practice.

The other caveat here is that without a mortgage history to assess you, some lenders might want proof of rental payments and additional evidence they might want to see about DMP conduct.

Shared ownership

This is also possible, but the main thing to note here is that not every lender offers shared ownership mortgages, and not every lender will accept your DMP.

Considering both of these factors can dramatically reduce the number of lenders. Then, any lender that will consider your DMP and offers shared ownership will review your income, deposit, personal situation, and property – the number of lenders left might be quite small.

This puzzle is exactly why most DMP borrowers want to work with a broker (just make sure they have experience with DMPs as it can be a lot of work to navigate, and we’re often rescuing mortgages from brokers who’ve tried their best but made a mess!).

Remortgaging

Remortgaging with a DMP isn’t different from buying with a DMP; they are looking at the same things when it comes to lender policy. It’s perhaps more likely that the average homeowner has more equity than a first-time buyer has a deposit, so on average, more remortgages are possible, but that’s about it.

The process is much the same, too.

But…

A remortgage is not always the best way to borrow more

The only thing to remember is if you’re borrowing more, can you afford the extra AND the DMP? Also, it’s worth checking whether you should do this with a brand-new lender.

It’s possible that you had a DMP after already having an amazing mortgage with a table-topping lender. In order to borrow more now, you’d need to refinance away from that great mortgage (perhaps with early repayment penalties to pay, too), and then the new borrowing and the existing mortgage amount would be all on a higher rate.

So it’s always worth considering a second mortgage / secured loan here.

Borrowing on a secured loan with a DMP

Second mortgages allow you to keep the original mortgage and borrow extra with a new lender. This can be beneficial when you have a great deal or you’re tied in and want to release some equity from the property.

Example:

Your mortgage today is £300k @ 3.5% with Halifax, costing you about £1500 a month over 30 years. You can afford to borrow an extra £50k for an extension, but you have an active DMP.

Option 1: full remortgage with a new DMP lender – offering £350k @ 5.9%, which is about £2,235 a month. If this rate never changed, that would work out around £670k in total cost of borrowing over 25 years.

Option 2: keep your mortgage £1,500 and take a second mortgage with a DMP lender – offering £50k @8.9%, which is about £385 a month. Combined, this is a monthly £1,885. If these rates never changed, it would be approximately £566k total cost of borrowing over the 25 years.

⚠️ That is a whopping £104,000 difference over 25 years.

These types of equations start to reveal the value of good advice.

Buy-to-let mortgages with a DMP

Those applying for a buy-to-let mortgage with a DMP will face similar restrictions to residential mortgage borrowers. There are fewer BTL lenders than residential, and the income assessments are of course different too – they review rental income to service the borrowing and affordability works in slightly different way – often this means the DMP doesn’t have an impact other than in your risk profile, and narrowing the number of lenders that might consider you.