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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 13th October 2020*

Getting a mortgage after having a debt relief order (DRO) can be tricky, as each lender will view your credit history and circumstances differently. The key things the lenders will be looking at in terms of the mortgage application will be:

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How the registration and discharge date can affect getting a debt relief order mortgage:

All lenders will want you to be discharged from your debt relief order before considering a mortgage application. The reason for this is while you’re within the debt relief order there are usually restrictions, such as only being able to borrow up to a maximum of £500, that can last for 12 months until you are discharged from the debt relief order.

After being discharged, the debts that were included within the DRO are written off. Generally, most lenders require 6 years to pass before considering an application however there are several that will consider far less than this, with some only requiring a minimum of 12 months to pass since discharge, to ensure that any credit taken after the DRO has finished is conducted satisfactorily.

There are in fact, a handful of specialist lenders that can even consider an application on the first day after discharge, and if you own a property with enough equity, and you can afford to borrow it, one or two lenders may be able to annul the bankruptcy and delete it from history.

Restrictions and mortgages after DRO discharge:

If while in the debt relief order you don’t follow the terms of the order, a restriction can be placed on you (known as a debt relief restrictions order, DRRO) and this can increase the term that the individual is restricted from borrowing.

The length of this restriction will be down to the courts and the official receiver, and depending on the terms of the restriction, mortgage lenders may still want an additional 12 months to clear before considering a mortgage to someone with a debt relief order.

Getting a mortgage with new credit issues after a debt relief order

If there are any other bad credit issues showing on the credit file during or after the time the debt relief order is discharged, the lender may ask to see a list of the accounts that were included within the debt relief order (DRO) to cross reference. These debts should show as satisfied after the date of discharge – if they still show as outstanding, then you may need to speak to the official receiver, the lender, and the credit reporting agencies to get these updated correctly, before making any application for a mortgage.

If there are any credit issues showing after the debt relief order, then this can restrict you further as the lenders may view it that you did not take the debt relief order seriously.

A lender will want to see that you have learnt from the experience / that it was perhaps a one off, and having additional bad credit afterwards can show to the lender you are higher risk, so they may be less willing to lend, and your options may become more limited.

How can bad credit affect my chances of a mortgage after a DRO?

Below is a list of potential credit issues you may be faced with as a borrower if you’ve experienced any of these since your DRO:

  • Adverse credit overview
  • Low credit score
  • Late payments with a DRO
  • Defaults
  • County Court Judgements (CCJs)
  • Individual Voluntary Arrangements (IVAs)
  • Repossession

It is vital that you get the right advice. Talk to one of the advisors we work with who specialise in mortgages for people with a poor credit history.

Review your credit files before applying

One of the key things the lenders will base their decision on is the credit report. If you haven’t already obtained a copy of all three credit reports from the main agencies (Experian, Equifax and Call Credit), you can check your credit reports online.

The specialists we work will need to review a copy of your credit reports to understand exactly where you stand in the current market if you’re specifically trying to get a mortgage with a debt relief order.

How the reason for a debt relief order can impact mortgages:

Some lenders may be less willing to lend depending on the reason as to why the debt relief order was originally taken out.

For example, if the debt relief order was related to an unpaid tax bill, many lenders will view that as higher risk and require a higher deposit or decide not to lend at all.

Another example would be if the order was because of a failed business and the applicant is still self-employed in the same line of work – many lenders will assume the probability of things going wrong again is too high risk for them to take.

Deposits needed for getting a mortgage with a debt relief order

“How much deposit will I need for a mortgage with a debt relief order?”

This will mostly come down to the date of registration and the date that you were discharged. Generally, the further from your discharge date the lower deposit levels you would need, as the market becomes less restrictive to you.

The table below gives a rough guide of the potential deposits needed:

Years from discharge: Deposit needed:
0 – 1 year from discharge 30 – 35%
1 – 2 years from discharge 20 – 30%
2 -3 years from discharge 15 – 20%
3 – 4 years from discharge 10 – 15%
4 -5 years from discharge 5 – 10%
5 -6 years from discharge 5 – 10%

To get the best idea of where you stand in the mortgage market with your discharge date, make an enquiry and one of the specialists can get in touch to discuss your situation today.

Other frequently asked questions

How long does a DRO last?

Generally, a debt relief order will last for 12 months. Once a full calendar year has passed, the debts listed in the DRO will be discharged and you’ll no longer have the liability.

However, in some circumstances, it is possible for the Official Receiver to apply for a Debt Relief Restriction Order which could extend the DRO for up to 15 years, if you’re found to have been reckless or in anyway dishonest about your financial situation.

Can I get credit after a DRO?

Your debt relief order will show up on your credit file. This record will reduce the number of lenders willing to loan you credit, because your DRO is evidence that you’ve struggled to maintain debt repayments in the past.

The DRO note will remain on your credit file for up to six years which means it may be some time before you can easily find credit from a range of lenders.

Can I get a mortgage after a DRO?

Each lender views income and affordability differently, and many accepting DROs offer lower loan amounts to account for the increased risk they perceive to be taking on.

Once your DRO has been discharged you should be able to find lenders willing to offer you a mortgage, although your options may be limited and for the best rates you should consider using a specialist bad credit mortgage advisor who has experience with organising mortgages for customers who have DROs on their credit file.

Call 0808 189 2301 for a free, no obligation chat.

We’ll match you with an expert experienced in helping customers in similar circumstances. They’ll be happy to answer all your questions and match you with a lender most likely to approve your application first time round so you avoid unnecessary mortgage credit checks which may bring your credit score down.

How do debt relief orders affect mortgage affordability?

A DRO can affect getting a mortgage for the amount you need to borrow, because of the small number of lenders happy to consider your application. As there are fewer lenders, those that are left to choose from may have more restrictive policy on affordability and not lend as much as another lender.

What can I borrow on a mortgage if I’ve had a DRO?

The max borrowing may be limited to 3 or 4x income, with other lenders more generous with their affordability calculations, potentially lending up to 4.5 – 5x your income, and a handful even up to 6x in the right circumstances.

If you have a lot of financial outgoings, this can impact the affordability as the mortgage lenders will take those monthly outgoings into their calculations.

To get the best idea of where you stand in the mortgage market with your affordability, make an enquiry and one of the specialists can get in touch to discuss your situation today.

Can I get a buy-to-let mortgage with a debt relief order?

The buy to let market is a little more limited than with the residential mortgage market.

Most buy to let lenders in the current market would want a minimum of 3 years from the date of discharge with a debt relief order before being able to consider a mortgage application, however certain lenders can consider by exception if your overall proposition is strong (i.e. if you have a massive deposit/loads of disposable income/ and the DRO was for a good reason such as a major, one-off life event.)

If you were discharged over 3 years ago then there are usually far more options available.

Deposit levels for the buy to let mortgages will vary between each lender but generally, you would need a minimum of 15 – 25% deposit depending on your experience as a landlord and the date of the DRO.

Can I get a secured loan with a debt relief order?

A secured loan is secured against an asset, such as your home. While you have a DRO, you cannot have any assets worth more than £1,000, so you wouldn’t have any assets to secure the loan against.

A DRO stays on your credit record for 6 years after the DRO has ended. Thankfully, a few lenders will consider a secured loan after just 3 years, but you will need to show that you have met all your payments in that time.

Can I get a second home with a debt relief order?

The story is much the same as above, a few lenders may consider you, but you really should get expert advice from an advisor who specialises in this area.

Can I get a joint mortgage with a debt relief order?

Yes. The rules and the way your debt relief order is treated are no different than they would be if you were applying for a mortgage on your own.

Having a DRO against your name will affect the overall strength of your application, even if the person you’re applying with has clean credit. Keep in mind, though, that there are specialist lenders who handle joint mortgage deals with one bad credit applicant every day.

Speak to a debt relief order mortgage specialist today

If you’ve got or have had a debt relief order and want to know where you stand when it comes to credit and mortgages, call 0808 189 2301 or make an enquiry and speak to one of the expert advisors we work with.

They’ll be happy to answer all your questions and help you find a mortgage solution to suit your unique circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 13th October 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.