How a debt management plan can affect your mortgage
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This information and enquiry service is not a full financial assessment or a guarantee of suitability or debt write-off. Debt solutions are not suitable for everyone. Fees may apply, and your credit record and assets may be affected. Get advice on your circumstances before choosing a solution.
MoneyNerd introduces enquiries to The Debt Advice Service and may receive a referral fee. For free, independent guidance and help finding a debt adviser, visit MoneyHelper.
This information and enquiry service is not a full financial assessment or a guarantee of suitability or debt write-off. Debt solutions are not suitable for everyone. Fees may apply, and your credit record and assets may be affected. Get advice on your circumstances before choosing a solution.
How a DMP interacts with existing mortgage payments and may affect remortgaging or a future mortgage application.
What is the effect of a DMP?
A DMP normally deals with non-priority unsecured debts. Mortgage payments are a priority expense in the affordability budget, and the secured mortgage itself is not included. Continue paying the mortgage as agreed, and speak to the lender urgently if it is unaffordable.
A DMP does not itself replace the existing mortgage terms. However, changes to income, expenditure or credit history can affect later borrowing, and missed mortgage payments can put the home at risk. Tell the DMP provider about any payment or interest-rate change so the budget remains realistic.
Can I remortgage?
A remortgage may be possible, but acceptance, affordability checks and pricing depend on the lender, credit record and circumstances. An active DMP and defaults can restrict the options. A product transfer with the current lender may involve different checks from moving lender or borrowing more; ask what process applies.
Do not assume that a new mortgage offer will be available when a fixed rate ends. Speak to the lender or a regulated mortgage adviser early. Borrowing extra against the home to repay unsecured debt can increase total cost and puts the home at risk if repayments are missed.
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Can I get a mortgage during the plan?
It’s not impossible to get a mortgage while you are still on a Debt Management Plan. However, it is considerably harder because of your existing debts and the damage that a DMP can do to your credit file. If you are approved for a mortgage while on a DMP, you could be offered a less favourable interest rate.
Understand your debt options
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The Debt Advice Service can explain your options, including their benefits, costs and risks. Options available depend on your circumstances. There’s no obligation to take a debt solution.
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Can I get one after it has finished?
Finishing a DMP can improve affordability, but it does not guarantee a mortgage or immediately remove earlier credit problems. A DMP is not a separate public insolvency entry, but reduced-payment arrangements, arrears or defaults on the included accounts can damage your credit record. A default normally remains for six years from its recorded date. Accounts without a default can remain for six years after closure. There is no single six-year countdown from the day a DMP starts.
Check your credit files for accuracy and ask a regulated mortgage adviser how lenders may assess the completed plan. Deposit, income, spending and the wider borrowing criteria still matter.
Are there any other options?
A debt adviser can help you compare the options available in your circumstances, including eligibility, fees, credit effects and risks to assets. Free, impartial debt advice is available from MoneyHelper. MoneyNerd can also introduce you to The Debt Advice Service through the enquiry form below. MoneyNerd may receive a referral fee; fees may apply to a debt solution.
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MoneyNerd introduces you to The Debt Advice Service. We do not provide debt advice or recommend debt solutions.
Natasha
Very helpful and informative thank you
If you submit the enquiry form, MoneyNerd will share your details with The Debt Advice Service so they can contact you.
Some debt solutions have fees and may negatively affect your credit rating. MoneyNerd may receive a fee if you go ahead with a debt solution through The Debt Advice Service.
The Debt Advice Service is a trading style of Pacific Financial Solutions Limited.
For free, impartial help and access to not-for-profit debt advice, visit MoneyHelper.
Quick Summary
Existing mortgage repayments are taken into account as essential expenses when DMP providers negotiate your future repayments with creditors. But having a DMP can affect your ability to remortgage or take out a new mortgage, and even if you are approved, you might not get offered an appealing rate.
Thanks for reading this guide, and if you have more niche DMP queries, see if we have already answered them on our blog. MoneyNerd is covering all bases when it comes to DMPs and our content remains free!
