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Can I get a Mortgage with a Debt Management Plan (DMP)?

Currently being in a DMP, or having completed one recently, will affect your ability to get a mortgage. However, it doesn’t necessarily mean that you’ll not be able to obtain one. Instead, your options in the market will be limited.

There are many specialist lenders available, providing mortgages designed for people who’ve had credit problems. So even if you’ve been turned away by high street banks and building societies, don’t give up.

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Author: Carl Shave - CEO and co-founder
Last updated: 21 Nov 2024

What is a DMP?

A Debt Management Plan is an informal repayment arrangement between you and a creditor that you owe money to. They’re used when the money that’s owed is classed as a non-priority debt, such as store and/or credit cards, and loans.

To be able to obtain one, you’ll need to pay your usual bills like your mortgage, rent and utilities. Then you’ll also need to contribute to your non-priority debts.

As DMPs are not legally binding, you can cancel an arrangement any time. There’s also no legal obligation for you to avoid taking out more credit.

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Useful Information

Can I get a mortgage if I have a DMP?

Yes it’s possible, although it won’t be as straightforward compared to if you had a clean credit record.

When assessing a DMP mortgage application, lenders assess the usual criteria like your income and expenditure. This will help them determine your affordability. However, they’ll also consider the severity of any credit problems and how long ago they occurred.

High street lenders make decisions as to whether to lend based on a credit score. The information used to determine your credit score is gathered by credit reference agencies. The three main ones are TransUnion, Equifax, and Experian.

If, for example, alongside a DMP you’ve had a more serious credit problem, you’ll find it even more difficult to be accepted. Less serious issues, such as late payments that have since cleared, may not present so much of an issue to certain lenders.

As a general rule, the older the entry on your credit file, the less weight it will carry when a lender is deciding.

How to get a mortgage with a DMP?

To obtain a favourable mortgage deal, you’ll need a good credit record and a sizeable deposit. If you’re dealing with bad credit, the chances are that you’ll have neither of those.

Every month that you make a payment under your DMP, it can show up as an underpayment on your credit report. Although you’ve come to an agreement with creditors, they may still record the reduced payments as defaults. This is because you’re unable to pay the amount you initially agreed to pay.

Furthermore, if you had a substantial sum of money for a deposit, you may have used that to pay off your debt. All this combines so that the number of lenders and mortgage deals available to you is limited.

Trying to find yourself a lender willing to accept you can be difficult, so we’d advise seeking the support of an expert broker. The main reason for this is the exclusive deals they have access to.

Sometimes specialist bad credit lenders don’t advertise or offer their products to the general public, so they can only be accessed through a third-party broker.

If you want to explore your options, reach out today. We can pair you with one of our expert advisors who can help you get started.

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Can you get a mortgage after your DMP has finished?

Many of the points mentioned above also apply if you’ve completed a DMP. If you’ve completed a DMP in the past 6 years you’ll find it difficult to get a mortgage with a high street lender because the record will stay on your file for 6 years.

But in general you’re likely to find lenders more willing to give you a mortgage if you’ve completed a DMP. This will be considered alongside an assessment of affordability and any other items showing on your credit records.

If you’re looking for a mortgage following a settled DMP, the first thing to do is get a copy of your credit report. First, check that the basics are correct, such as contact details and electoral roll registration.

If you’re not on the electoral roll, make sure that you register and that it shows in your credit report. Your electoral roll registration not showing on your credit report can impact your credit score.

Next, check your credit details. Are there any defaults showing for debts that are now settled? If so, write to the companies and ask if they’ll update the status of the debt from default to satisfied. They’re not obliged to do that, but if they’re prepared to then those defaults will not be noted as such on the report.

Check for any incorrectly recorded adverse details. If so, write to the companies and ask for those entries to be removed (copy the letter to the credit reference agency as well).

Take steps to rebuild your credit history. Borrow a small amount and pay it back as agreed, or take out a credit card with a small credit limit. A good tip is to set up a direct debit to ensure the minimum payment is always made by the due date. This will make sure no late payments are shown should you forget to pay.

If you’re applying within 6 years of the DMP being settled, it’s likely you’ll need to use a broker. This is the same as if you were still in a DMP, because many lenders shy away from those with credit issues. A broker will have exclusive access to deals offered by specialist DMP mortgage lenders. From this they can assess your situation and advise you on the most suitable and realistic choice.

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How much can I borrow if I have a DMP?

The ‘loan-to-value’ (LTV) ratio available to you will be affected by your credit history. The LTV is the percentage you’re able to borrow compared to a property’s market value.

With a current DMP or a settled one in the past 6 years, it’s unlikely you’ll be able to borrow at a high LTV. Lending is likely to be restricted to 85%, so you’ll likely require a minimum 15% deposit.

More serious credit issues might mean a lender will ask for an even higher deposit. This reduces the risk exposure for them.

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Carl Shave

CEO and co-founder

About the author

Carl Shave has been involved in the mortgage & finance industry since leaving education and is one of the co-founders of Just Mortgage Brokers. He has written guest posts and provided journalist comments for companies such as The Times, FT Adviser, Mortgage Strategy, Mortgage Solutions and others, demonstrating his extensive industry knowledge.   Qualifications   Certificate in Mortgage Advice and Practice (CEMAP)   Year Attained: 2001   FCA Profile

Frequently asked questions

This depends on the individual lender, but it is currently 12 months. If you have a DMP, it’s likely you need to put down a bigger deposit and pay a higher interest rate. This applies regardless of how long your DMP has been in place.

Arguably the biggest issue you face is affordability. If you’re paying a DMP on top of other financial commitments, then you’ll have less for a mortgage.

If you’ve managed to save a good deposit, you then have a choice. Do you use all or some of that money to clear your DMP, then start saving again? Or do you try to get a mortgage with an active DMP?

Our team of specialist brokers can offer free, no obligation help and advice, so reach out if you want to explore your options.

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Yes, ideally they do to avoid doing more damage to your credit rating.

However, if you find you’re struggling to pay important bills because of your DMP, get in touch with your DMP practitioner.

You should also remember that a DMP is not legally binding and you can cancel one at any time.

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Yes, you can pay the complete DMP off early. You’re also able to pay more each month than was initially agreed.

A creditor may be willing to accept, say, 50% of the debt as a lump sum if you’ve been in a plan for 6 or more months.

You can do this with all your creditors or with just one (or one at a time), depending on how much you’re able to pay.

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DMPs are generally arranged and managed by a DMP practitioner. They assess your financial situation and carry out negotiations between you and your creditors. Once an agreement’s been reached, you make the required monthly payment direct to the practitioner.
The practitioner then deducts any fee they might charge and uses the balance to make the agreed payments. This means you make just one payment each month, no matter how many creditors are being paid.
This monthly commitment is then taken into consideration for your affordability in regard to your mortgage.

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