Selling Property to clear DMP - Good Idea or not?

giddykipper

Hi all

I wonder if you could give me any advice on a possible plan I've come up with.

I have a DMP with around £65k owed on it .... my current mortgage is also around £65k! Next door sold their house in January for £120,000.

My parents are down-sizing in a year or so and have told my brother and I that we get £25k each when they do ..... which is obviously fantastic but not enough to cover my DMP!

So, I wondered if it would be possible to sell my house, use the money to clear the mortgage and DMP (I would write asking for full and final settlement) and then use the £25k for a deposit on another property.

I would have £300 more a month to put towards the mortgage if I pay off the DMP.

My questions are though .... what sort of % do companies accept as full and final settlement?? And, how likely would I be to get a mortgage under these circumstances?? I've never missed or been late with a mortgage payment and would probably stay with C&G who I have my current mortgage with.

The timing would have to be spot on as I'd need to clear my existing mortgage/debts in order to get the new mortgage (as then I'd have no debts).

The DMP will probably run a lot longer than the new mortgage and at least the money would be going into a property and I'd be free of the shame/guilt/stress of owing so much money to so many different companies.

Any advice/suggestions??

Thanks x

PNPSUKNET

Since getting you last mortgage, how has you credit file changed?

giddykipper

Hhhhhhmmm well I assume with being in a DMP its shot to pieces to be honest.

I've had my current mortgage for 10 yrs and my DMP for 3.

I'd say half of the companies I owe to have sold the debt on to agencies..... does that make a difference rather than owing the original company?!

bargainbetty

The biggest problem you have is the effect that the DMP may have had on your credit file. Very often, it shoots your credit rating to pieces for 6 years. If that is the case, you may find it hard to get another mortgage.

If you have the funds to do a full and final settlement, you might find that you can clear a larger portion of your debts than you think (make sure you don't tell them you have the funds, just that you might be able to get them, otherwise they might come after you for the full amount).

You will also be in a position to throw more of your money at the debts (once you have cleared the £25k's worth) and you might find it comes down a lot faster as you could save extra towards F&Fs.

I'm not saying you shouldn't do it, but I would talk to the mortgage company first and find out what effect the DMP has had, as PNPUKNET mentions above, it could have changed things a lot.

Good luck x

Broken_hearted

I would hang on till you get the 25K and offer F&F.

DarkConvict

For F&F offers it is recommended to
1) Use the national debtline template as the basic letter
2) Add in a 14 day reply deadline before offer is withdrawn (limited time offer)
3) Mention funds are from a family member/3rd party so they do not just ask you to pay more per month and think you are personally holding out on them.
4) If they fail to reply you assume they are declining and the money will be offered to other creditors in a similar offer.

Given the length and payment history they will likely be accepting in the range of 20-50% for settlement of the debts, but what they do accept is down to so many factors you cannot really guess, just offer and see what is made. Remember if they do bite but want a higher figure, do a counter offer.

well here is a ROUGH guide on what companies have been known to accept,

please remember some people get lower amounts other have to pay much more than this,

these things depend on so many variables including what side of the bed the person in the company got out off

anyways rough guide is below

Debt still with original creditor NO default = 90% or more
Debt with original creditor but with a default = 75% or more
Debt with 'in house' debt collectors of the original creditor = 60% or more
Debt with external debt collector however still property of original credit = 40% or more
Debt owned(purchased) by external debt collectors = 25% or more

Both of the above should be useful.

I would try and use the £25,000 to clear as much of the debt as possible. 25K is 38% of 65K. So start with low offers, of 20-30% of the debts that have definatly been sold. Clear as much as possible before offering more in settlement offers.

giddykipper

I'm really keen to move house anyway ...... I wonder if I spoke to C&G and explained everything they'd be able to give me an idea of whether they'd lend or not....spose its worth a try! I then have a couple of years to get this place up to scratch for selling!

Also it depends on what % the creditors are willing to accept - anyone got any idea? I know they're all different but just wondered if there were guidelines or something!?!?

And if C&G would say yes to the mortgage before I pay off the debt .... obviously as soon as the house sold I'd pay the debt but its the timing that worries me as well!

Thanks DarkConvict - our posts must have crossed - that's really helpful!

giddykipper

Also ....... with being in an arranged DMP would I have to do F&F via them (Payplan) or would I be better approaching the companies myself?

DarkConvict

Keep Payplan informed, but make the F&F offers yourself. State who your offering to and how much, and if they accept. Basically keep them informed of your actions.
If debts are paid off, then they simply come off the DMP.