Get a Mortgage after Debt Management Plan? (DMP) – How Long?

Do you have debts and are thinking about a Debt Management Plan (DMP) but are worried about how it might affect your ability to get a mortgage? You’re not alone – every month, over 170,000 people come to our website for guidance on questions just like this one.

In this article, we’ll answer the big question: ‘How long after a DMP can I get a mortgage?’ We’ll look at:

• What a Debt Management Plan is.
• How a DMP can affect your mortgage chances.
• Steps to take to get a mortgage after a DMP.
• The key financial points lenders look at when giving a mortgage.
• How to write off some debt.

We understand that dealing with debt can be scary, as some of our team members have been in the same boat. But don’t worry; we’re here to help you understand your options. By the end of this article, you’ll feel more confident about your financial future. Let’s dive in.

Is it Possible to Get a Mortgage After a Debt Management Plan?

This section addresses if it is possible to get a mortgage after a DMP is listed on your credit report. 

You’ll be pleased to know that there’s no official or legal blockade to getting a home loan with a DMP.

However, most lenders and creditors will be very reluctant to give a mortgage loan to someone who has a DMP listed on their credit file.

A DMP caters to a lot of loan types, and it’s very possible that your loans count as bad credit; such as personal loans or credit card debt. If you do have bad credit, it could significantly impact your chances of getting a mortgage loan.

So why does a DMP impact your chances of getting a mortgage? The answer is simple. Creditors see an excess of bad credit as risky financial behaviour. If you have a DMP listed on your credit report, lenders see you as financially unstable.

It signals to mortgage lenders that you’re someone who has faced a lot of trouble dealing with your debts in the past, to the extent that you’ve had to get a DMP to properly manage your debt.

One of the most important things you should know about mortgage lenders is that they need to evaluate risk and reward at a much larger scale than other lenders. 

Mortgage loans are some of the biggest loans out there, and most mortgage lenders want to know if they’ll get a return on the massive investment they’re putting in.

When they see someone who is struggling with a DMP when it comes to smaller loans, they would certainly hesitate to lend their money to them.

Also, a DMP can affect your credit history, which is one of the most important things creditors consider when they’re deciding whether to loan you or not.

All in all, while it is possible to get a mortgage loan after a DMP, you’ll have to find the right creditor, one willing to offer you reasonable terms on your mortgage loan.

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How to Get a Mortgage After a DMP – The Complete Breakdown

This section addresses everything you need to know about getting a mortgage after a DMP.

Let’s get right into it.

1. Check your credit history

The first thing you should do to get a mortgage after a DMP is to contact one of the three main credit report providers and check your credit file.

Since this is the first thing most creditors will be looking at, you need to make sure everything is in order.

This means checking for any defaults that should not be there, or incorrect information that could harm your chances of getting a loan and needs to be updated.

2. Don’t spend more than you can afford to pay back

It’s best to avoid spending a huge amount on getting a house.

You may be tempted to spend a lot, but remember, you have a DMP listed on your credit file and the bigger the mortgage you apply for, the lower the chance is of it being accepted.

On the flip side, if you spend a smaller percentage of your budget on a house, you can probably pay a larger deposit upfront and you’ll have to pay back a much smaller mortgage loan.

3. Get help from a financial advisor 

Applying for a mortgage loan can be a very complex and emotionally heavy process. 

I recommend that you definitely seek debt help from an experienced financial advisor to guide you through your situation.

Alternatively, you could consult a mortgage broker to find potential lenders for you. Mortgage brokers specialise in finding lenders that offer suitable loans at low interest rates.

If you don’t want to do all the heavy lifting yourself, employ a mortgage broker and have them find the right loan for you.

Does a Mortgage After DMP Affect Your Credit Score?

If you’re continually failing to make monthly payments on your arrangement, it can have a very detrimental impact on your credit rating.

Again, a poor credit rating signals to potential lenders that you are a very risky investment.

When you apply for a home loan after your arrangement, some creditors may want to perform a hard search on your file, which could temporarily decrease your credit rating.

Otherwise, if you keep making regular payments on your arrangement and avoid hard searches on your file, you’ll find that home loans after your arrangement don’t really impact your credit rating in a negative manner for long.

Key Financial Points Creditors Will Look at while Lending

Let’s get right into it.

1. Your income and financial status

One of the things that matters most to potential mortgage lenders is your financial status and your income.

They want to evaluate if your income is sufficient to be able to make payments on both your DMP and your mortgage loan.

If you’re struggling to make ends meet, most creditors won’t take a second look at you when it comes to seeing you as a potential borrower.

2. Your credit score

Another pertinent factor when it comes to your application is your credit score. I cannot stress enough on the importance of having a good credit score. 

If your DMP is active, which it will be if it has been less than six years since you got it (if you haven’t paid it off), creditors will be much less willing to loan you than if you have a DMP that has expired or no DMP listed at all.

Your credit rating may take a hit because of your DMP, and even more so when you apply for a home loan.

3. The status of your DMP

Another important factor you need to take into consideration is how long your DMP has been active.

If your DMP is relatively recent, you’ll find that you’ll face a lot of difficulty finding creditors willing to loan you.

However, once a few years pass, and when your DMP is four to five years old, you’ll find virtually no difference in the way lenders and creditors treat you.

This is primarily because

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Wrapping it Up

While applying for a mortgage after your arrangement expires can certainly improve your chances of getting one, it can backfire if you don’t know what you’re doing and if you haven’t planned ahead.

I hope this guide helped you learn about your options if you’re facing a similar situation.

If you need more debt advice, feel free to reach out!