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Taking a mortgage while in a dmp

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Taking a mortgage while in a dmp

Postby Damian » Thu Jan 07, 2010 11:26 am

I have been in a DMP for 2 and half years (50k repaying over 15 years!!) I am currently renting but my parents have offered to give me a lump sum to put down as a deposit for a house. Is it possible to take a mortgage when you are in a dmp?
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Re: Taking a mortgage while in a dmp

Postby Steve Jackson » Thu Jan 07, 2010 6:55 pm

Hi Damian and welcome to the forum

It is certainly possible to take a mortgage while you are in a dmp. However, the problem you will have is your credit rating will be poor and you will have to get what is called an adverse mortgage. Basically you are percieved as a high risk and so only certain mortgage companies will lend to you. As such, you will have to use a specialist mortgage broker to arrange your mortgage for you.
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Re: Taking a mortgage while in a dmp

Postby Andrew Graveson » Fri Jan 08, 2010 3:39 pm

Hello Damian,

The status of your credit record will depend entirely on what your creditors have reported to the credit reference agencies. This varies hugely from case to case.

As such I'd suggest that you contact a mortgage broker. With your permission they'll be able to see your credit file and based upon the content of it advise you whether your mortgage requirements are realistic and what the arrangements available might be.
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Re: Taking a mortgage while in a dmp

Postby Geraldine » Mon Jan 11, 2010 5:11 pm

Hi there Damian,

If you have been in a debt management plan for over to years, then I would be fairly certain that your credit rating has been negatively effected. It is likely that one or more of your creditors has issued a default notice against you which will be registed on your file. As such, as Steve and Andrew have said, you should be able to take a mortgage but you will need to use a broker who can find you a lender who will work with you.

By the way, give that you currently have no property and nothing to loose, have you considered simply declaring yourself bankrupt to clear your debt? You would be debt free after 12 months. This might be better than looking at buying a property now and having the added strain on paying extra household bills which could mean paying less towards your debts and the dmp lasting even longer.....
Discharged from bankruptcy in 2010 and debt free. Thanks to all on this forum for your advice and support.
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Re: Taking a mortgage while in a dmp

Postby Hayden » Wed Jan 13, 2010 6:04 pm

Hi Damian

I tend to agree with Geraldine on this one. If you are worrying that your DMP will take you 15 years to repay, surely it is better to clear this debt first, possibly by declaring bankrutpcy, and then looking to buy a house when you are debt free. Have you spoken to anyone about this option?
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Re: Taking a mortgage while in a dmp

Postby Damian » Wed Jan 13, 2010 6:14 pm

Hi and thanks for your relies. I did have a look at bankruptcy but am worried about what it would do to my credit rating long term. Wouldn't declaring bankruptcy stop me from buying a house??
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Re: Taking a mortgage while in a dmp

Postby Andrew Graveson » Thu Jan 14, 2010 12:46 pm

Hi Damian,

Bankruptcy will have a serious impact on your credit rating for six years.

Many mortgage companies now ask on application forms whether you have ever been bankrupt (or in an IVA) which gives them the option to take this into account when making lending decisions long after it no longer appears on a credit file.

Bankruptcy could not be said to specifically stop you from being able to buy a property in the future, but it is likely to increase the complexity and costs of getting a mortgage for some time.
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Re: Taking a mortgage while in a dmp

Postby Geraldine » Fri Jan 15, 2010 4:17 pm

Given Damian has been in a DMP for the past 2 years, do you think his chances of getting a mortgage would be made any worse by declaring bankruptcy Andrew?

It seems to me that if he is currently living with his parents, his living costs would rise significantly if he moved into his own property (even a one bed place). This could make it more difficult to sustain his DMP payments and even jeopardise his ability to pay his mortgage in the long run...?
Discharged from bankruptcy in 2010 and debt free. Thanks to all on this forum for your advice and support.
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Re: Taking a mortgage while in a dmp

Postby Andrew Graveson » Tue Jan 19, 2010 11:36 am

Hi Geraldine,

Mortgage availability is limited at the moment wherever there is any negative credit history. However if you speak to the representatives of mortgage lenders they would view an insolvency (bankruptcy or IVA) much more seriously than the missed payment, late payments and Default Notices that typically accompany debt management plans.

Your point about affordability is obviously important.
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Re: Taking a mortgage while in a dmp

Postby Hayden » Tue Jan 19, 2010 7:01 pm

Damian, if you are considering moving from your parents property into a home with a mortgage, it is vital that you work out the expected monthly costs of keeping up the house before you decide anything. As Geraldine says, your living expenses are almost certainly going to be significantly higher if you buy a house compared to living at home and you need to make sure you can afford this as well as your debt payments.
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