Mortgages After a Debt Relief Order

Everything you need to know about getting a Mortgage with a DRO and how a dedicated Mortgage broker can help you

Firstly, is your debt relief order completed or still on going?

Home Bad Credit Mortgages Mortgages After A Debt Relief Order
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: March 15, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 15, 2024

We’ll look at whether it is possible to get a mortgage with a debt relief order (DRO) against your name, and what the lending criteria would be.

We also highlight how a bad credit mortgage broker can prove invaluable for post-DRO mortgage applications and why it’s beneficial to remortgage after the issue has been satisfied.

What is a debt relief order?

A debt relief order (DRO) is a method for dealing with debts worth £30,000 or more that the debtor is struggling to pay. They are temporary solutions, designed to tide the debtor over for a year unless their situation improves before then. They are arranged through special DRO advisors.

You will only qualify for a DRO if you don’t own your own home or other assets of substantial value, and don’t have much disposable income.

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Can you get a mortgage after a debt relief order?

Yes. It’s possible, but it can be more complex and you’ll likely have a smaller number of mortgage lenders available to you. This is because DROs are considered to be a moderately severe form of bad credit, which means that some mortgage lenders might consider you too high of a risk to offer finance to.

Other mortgage providers might lend to you but at higher rates or ask for a larger deposit. The good news is that it’s still possible to secure a competitive deal with the help of a specialist mortgage broker.

How long do you have to wait?

You will need to wait a minimum of 1 year from when the issue was registered as a DRO puts a restriction on your borrowing for the 12 months it is in place. When that 12 months has come to an end, your debts are discharged – this is when you are free from the restrictions of the order.

However, the DRO will stay on your credit report for six years. While that may affect your credit rating for that time, all of the debts within the DRO will have been eradicated from your report after the 12-month period which is good in the long run.

If you want to apply for a mortgage before the 6 years have elapsed, you may have to go to a specialist bad credit mortgage lender or choose a product with less favourable terms than you had wanted. For example, you may need a bigger deposit or to accept a mortgage with a higher-than-expected interest rate.

How to get a mortgage after a DRO

Your first step should be to find a mortgage broker who specialises in bad credit. Make an enquiry and we will match you with an advisor who has experience with DROs for free.

Your handpicked mortgage advisor will guide you through the following steps:

  • Calculating how much you can borrow: This can be tricky without the help of an expert as your DRO will need to be factored in. Your mortgage broker can provide you with bespoke calculations in no time.
  • Downloading your credit reports: After helping you do this for free, your broker will suggest ways to optimise your credit reports, which can make all the difference if you have bad credit such as a DRO against your name.
  • Finding the right lender and best rate for you: The right mortgage broker will be able to do this for you, thanks to their knowledge, experience and lender contacts, potentially saving you time and money in the long run.

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Lending criteria

Lenders may look at the following to determine whether they want to extend a mortgage to an applicant:

  • The reason for your DRO – Lenders will want to ask why you had a DRO and will assess whether that’s a satisfactory explanation. They’ll then consider each application on a case-by-case basis, to determine how risky it is to lend to you.
  • Time elapsed – While the issue will stay on your credit history for 6 years, different lenders will accept different time periods since the DRO has been satisfied on applications. In general, the older it is, the better. Some may go as short as a 12-month period, others won’t consider you until 3 or 4 years have passed.
  • Current credit history – All mortgage applicants will be subject to a credit history check. However, if you have had a DRO, lenders will often require a clean credit report with no bad credit issues since it ended.

In addition, lenders will likely want applicants to meet some basic requirements too:

  • Age –  Most lenders want applicants to be between 21 and 70. Some may go up to 80 years of age.
  • Deposit and Loan to Value (LTV) ratio – A good way to secure as low a rate as possible is to increase your deposit and therefore improve the LTV ratio. A better LTV ratio reduces the risk to providers of lending to you – hence why they offer lower rates.
  • Income and income type – Usually, the more you earn, the more you can borrow. However, how you earn your income is a consideration for some lenders. Some may not accept bonuses or commissions as part of their calculation, for example, thus reducing the maximum amount you can borrow.

How much deposit will you need?

The table below will give you an approximate idea of how much deposit you will need based on the age of your DRO, but keep in mind that the actual amount can vary depending on the overall strength of your application and the lender’s criteria.

Age of DRO Approximate Deposit Needed
Less than 1 year 30-35%
1-2 years 20-30%
2-3 years 15-20%
3-4 years 10-15%
4-5 years 10%
5-6 years 5-10%

How much will I be able to borrow?

Having a DRO won’t directly limit the amount you can borrow as this will mainly be based on your income and outgoings. Most mortgage lenders will let you borrow 4.5 times your salary, but some go higher than this, up to 5-6 times your salary.

Just keep in mind that accessing the higher income multiples might be more difficult with bad credit, purely because you may have fewer lenders to choose from.

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Which lenders will consider your application?

There are several lenders who will consider an applicant with a satisfied debt relief order, such as Nationwide, The Family Building Society and Skipton. Each provider will have slightly different approaches to assessing applications.

They will likely offer a higher rate to applicants with past DROs still on their credit report in comparison to those without.

What rates do they offer?

Take a look at our table below to get an idea of what rates are currently available for bad credit mortgages.

Lender Product Details
Frosted Rates Image

Looking for more rates and deals?

We can match you with a mortgage broker who can provide you with up-to-date bespoke rates and deals from across the entire market.

Last updated May 2024

The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. Speaking to a mortgage broker is the best way to keep track of the rates available at any given time. 

Remortgaging after a debt relief order

If you have a mortgage coming to the end of its term and your DRO has been satisfied, it is a good idea to see whether you can get a better rate when remortgaging.

That’s because, if your DRO has sufficiently aged, you may be able to find a provider willing to lower your rate and save you money each month. That will very likely be the case if your DRO is 6 years past being satisfied and therefore no longer on your credit report.

Your credit rating will have improved in the eyes of the majority of lenders out there who will now see you as less risky. They’ll more easily extend you a lower rate therefore when you remortgage.

It may be possible to remortgage whilst a DRO was still in place but you would need only a specialist lender would be able to look at this and it would depend upon when it first appeared on the insolvency register.

Get matched with a bad credit mortgage broker

As a DRO is an instance of bad credit in your past, it is invaluable to talk with a specialist bad credit mortgage broker to improve your chances of being approved.

This type of bad credit definitely does not automatically stop you from securing a mortgage but can narrow your options as to the mortgage provider and therefore the terms and conditions you are potentially offered.

For that reason, specialist brokers are a fantastic resource as they will know which providers offer what products when considering your specific circumstances. Not only does that help your application’s success rate, but it also improves your chances of getting the best terms possible for your mortgage.

They will save you time and stress, therefore, and ultimately money if they can help you secure a lower rate.

Contact us today so we can connect you with one of the bad credit specialists we work with. Our service is free and you are under no obligation to use the broker we pick out for you.

Call us on 0808 189 2301 or make an enquiry today.

Maximise your chance of mortgage approval with a specialist in mortgages after a debt relief order

Get Started Phone Icon 0808 189 2301

FAQs

If you are making a joint application, your adverse credit history will affect the options available to you by limiting the number of providers willing to extend you a loan. However, if the DRO is in your name, and your partner is applying for a mortgage on their own, their eligibility should not be affected.

However, questions may arise if you are both trying to put down a deposit together as lenders will want to know its source.

See our guide to applying for a joint mortgage with one bad credit applicant for more information.

Yes. A DRO will appear on your credit file for up to six years after the issue was registered and can impact your chances of getting approved for a mortgage, or any other type of finance for that matter.

If you’re applying for any kind of credit worth £500 or more, you are obligated to declare the DRO to the finance provider.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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