The short answer to this question is that you may be able to get a mortgage while you are in a debt management plan (DMP) but this is likely to be difficult in many cases. If you are looking to remortgage rather than to take out a mortgage to buy a new home, you may be more likely to succeed.

Your eligibility for a mortgage will depend on lots of factors, some of which you cannot control. If you do not currently own your own home but have money available to pay a deposit for a house, you also need to think about using the money to clear your debts instead.

What is a debt management plan (DMP)?

A DMP is a way of paying your debts back at an affordable rate. You make a monthly payment to a debt management company, and they split this fairly between your debts. In return for you paying as much as you reasonably can towards your debts, your creditors are asked to freeze the interest and charges on your debt.

A DMP is informal. This means that your creditors:

• don’t have to accept the reduced offer of payment; and
• are not legally stopped from taking further action to collect the debt.

But in many cases, lenders will accept offers made in a DMP and will freeze the debt.

We only recommend using free DMPs so that all your monthly payment is used to clear your debts. To find out more, see our Debt management plans guide. You can also negotiate reduced payments yourself for free. To find out if you can have a free DMP, or if you want advice about asking for reduced payments yourself, call National Debtline on 0808 808 4000.

Can you get a mortgage with a debt management plan?

It may not be impossible to get a mortgage to buy a new property if you have a DMP, but it is likely to be a lot harder.

The fact that you have been making reduced payments towards your debts is likely to be shown on your credit reference files.

• Information shows on credit files for six years, so if you have been in a plan for longer than this, your debts may have dropped off.
• If you make reduced payments or miss payments for several months, a lender will usually record a default on your credit file. A default will stay on your file for six years.
• Not all lenders report to credit reference agencies. Some lenders may only report to one or two of them. So, a lender may get different information about your payment history depending on which credit reference agency they use.

Read our Credit reference agencies guide to find out more.

How lenders assess mortgage applications with a DMP

A mortgage is usually the biggest financial commitment someone makes during their life. Because of this, lenders will look at lots of factors before deciding whether to offer a mortgage.

• They will consider your payment history from your credit files. They are less likely to lend if you have missed payments, and less likely still if you have any defaults or county court judgments (CCJs) on your files.
• They will complete an affordability check. As part of this they will usually ask about your income and outgoings. They may also ask to view bank statements to confirm what you usually spend.
• You will usually need to be able to pay at least a 5% deposit towards the purchase of a property. If your deposit is a much larger percentage of the purchase price than this, it may be easier to get a mortgage.

Mortgage lenders will have their own rules about how to check whether you are eligible and the level of risk they will take. It may be helpful to speak to a mortgage adviser so they can help you find lenders that may offer a mortgage based on your current circumstances. You may have to pay a fee for their help.

When it may be easier to get a mortgage

You may have a better chance of getting a mortgage in some circumstances.

• If your debts were defaulted on your credit files more than six years ago, they will no longer be shown.
• If you repay a debt in full, it should be marked as satisfied on your report. So, lenders will be able to see that the debt is no longer owed.
• Once your DMP ends, you will have more money available to pay towards a mortgage payment. This should make it easier to pass an affordability check. There will also no longer be any risk that a creditor could get a court judgment against you. This means a lender may think there is also less risk in lending money to you.

Does a debt management plan affect your chances of getting a mortgage?

If you are currently in a DMP, this is likely to make it much harder to get a mortgage. It should become easier to get a mortgage once your plan has finished. But an application could still be affected by the information in your credit report for some time afterwards.

Which mortgage lenders accept a DMP?

It is up to mortgage lenders to set their own policies about whether they will accept a mortgage application. A mortgage adviser may be able to help you find lenders that may offer a mortgage based on your current circumstances.

If you find a mortgage deal, you are likely to be asked to pay a higher rate of interest while you are in a DMP. This means that your monthly payments will be more expensive and that you will have to pay more money back across the term of the agreement.

Can you remortgage while on a debt management plan?

It may be easier to get a remortgage than a new mortgage while you are in a DMP if you have had a fixed-rate deal that is about to end or has finished. Your lender may agree to move you to a new fixed-rate deal without completing an affordability check if the payments on a new deal would be lower. An affordability check is also less likely to be needed if you are not asking your lender to change the term of your mortgage or the amount you are borrowing. Your lender may call the new deal a ‘switch’ or ‘product transfer’.

A mortgage adviser may be able to help you find other lenders that may offer a remortgage based on your current circumstances.

It may still be harder to remortgage in some cases.

• If you are behind on payments for your current mortgage deal.
• If your current mortgage lender has stopped offering new deals.
• If you have an interest-only mortgage and you are reaching the end of the term of the mortgage, not just the end of a fixed-term deal.
• If your lender has not signed up to the Mortgage Charter.

How long after a DMP can you get a mortgage?

It will usually be easier to get a mortgage once your DMP has finished. There is no set time frame that applies to everyone though. Information about missed payments could show on credit files for up to 6 years after your DMP has finished or could have dropped off before you completed your DMP. As explained earlier, this all depends on how and when information was recorded on your credit files, and on which of the credit reference agencies is being used for a check.

Also, your lender will still look at other factors too. They will usually check whether they think you can afford a mortgage payment having looked at your living expenses and spending. You will also usually need to be able to pay a deposit when you buy a house. Generally, having a bigger deposit compared to the price of the house reduces the risk for the lender, making them more likely to lend to you.

Steps that may improve your chances of getting a mortgage

There are steps that you can take that may help your chances of getting a mortgage.

• Pay off your debts as quickly as you can. We recommend using a free DMP so that all of your monthly payment is used to clear your debts. See our Debt management plans guide to find out more.
• Make sure the information on your credit reference files is accurate. Our Credit reference agencies guide will tell you more.
• If you apply and are refused by one or two lenders, don’t keep applying to different lenders. Having lots of searches on your credit files can make it harder to get accepted.
• Think about speaking to a mortgage adviser. They may be able to help you find lenders that may offer a mortgage based on your current circumstances. They can also tell you if they do not think you will be able to get a mortgage right now.
• Having a bigger deposit can make it easier to get a mortgage. But it may be better to use the money to clear or settle your debts. See our Full and final settlements guide to find out more.

Alternatives if you cannot get a mortgage yet

For most people, the only way to buy a home is to get a mortgage. Unless you can afford to buy a property outright, there may not be much of an alternative. Read the earlier section Steps that may improve your chances of getting a mortgage to find out more about what you can do to improve your chances.

When to get free debt advice

You can get free professional help from National Debtline advisers when you need it. You can call for help if you:

• are worried about missing payments on your debts or bills;
• have already missed payments on your debts or bills; or
• have already started a debt management plan or another debt solution.