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Buying a Home whilst in a Debt Management Plan (DMP)

The Perks of a Debt Management Plan

Debt Management Plans are wonderful things. It is an agreement between the creditor to pay off any owed payments weekly or monthly, depending on what is agreed.

The advantages of using one of these include making regular set amount payments, you can have peace of mind and in some cases, creditors can freeze the interest so it’s more affordable for you or even stop actions like taking you to court (though this depends on the company).

In this Case Study, we look at a client who needed one of these to further her chances of obtaining a mortgage in Cambridge.

Obtaining a Mortgage whilst in a Debt Management Plan

When Katie called us after being declined for a mortgage elsewhere we could tell she was in a very stressful situation. She had come through a messy divorce and having to look after her children on her own with little financial assistance from her ex had clearly taken its toll.

By her own admission, she had made some bad financial decisions including trying to help out other family members with money and her debts got on top of her.

Katie decided to take control of her situation and reached out to Step Change for advice and they recommended she entered a debt management plan.

Having turned over a new leaf, Katie’s finances improved, and she was comfortably able to keep up the payments on the plan and her confidence rose to the point where she was able to start thinking about Moving Home in Cambridge.

Moving Home Mortgage Advice in Cambridge

As part of her divorce, Katie had ended up with the family home in her sole name and there was a decent amount of equity in the property to put down a deposit for her onward purchase.

Due to her previous financial mistakes it was going to be impossible to find a High Street lender prepared to grant her a new mortgage even though all the payments on her current mortgage were up to date.

When she called us, I advised Katie that there are lenders who will consider applicants with previous missed payments, defaults and CCJs and indeed there are options for people who are currently in a DMP, as long as all the payments have been up to date for at least 12 months.

Budget Planning for an Affordable Mortgage in Cambridge

The only thing is when it comes to the non-High Street lenders is that they tend to charge higher rates of interest because they are lending in situations where others would not. Katie and I ran through a detailed budget planner and we were both confident the proposed mortgage payments were affordable, and the mortgage went through fine.

As a footnote, if you need to take out a mortgage in Cambridge with a specialist lender it does not necessarily mean you will be paying that higher rate of interest forever.

As your credit rating improves and the issues you had move further and further into the past, the more chance you have of being accepted for a High St mortgage down the line. We keep all our customers mortgages under review and often the specialist mortgage deal is a “stepping stone” towards obtaining a cheaper mortgage in the future.

Book Your Free Mortgage Appointment

Looking to obtain a mortgage while on a Debt Management plan? Our expert mortgage advisors in Cambridge are here to help. With their specialist mortgage advice in Cambridge, they can assist you in navigating the mortgage process and finding a solution that works best for your unique financial situation. Reach out to us to schedule a free consultation and start taking steps towards securing a mortgage that fits your needs.

Date Last Edited: December 6, 2023

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