Applying for mortgage whilst on Debt Management Plan ?

Rubyminx

Hi, my partner and I currently have a fixed rate mortgage with Halifax which has a penalty until end of Aug 2015. We would like to move to a house at price £160000. Our current mortgage is £133000 and our current home is valued at £185000. Mortgage is 'portable'.
Last year, I undertook to pay debts of £20000 via a debt management plan. Having recently received money of £10000 I am hoping to offer settlement payments to the 4 companies that I owe money to by the middle of May, but of course they may not accept this.
Could the DMP scurry my application for a new mortgage ? Plus, will the new Lender insist that I pay off all debts before taking out a new mortgage ? My issue is that these are my debts and not my partners.
Thanks

Thrugelmir

Rubyminx wrote: »

Could the DMP scurry my application for a new mortgage ?

Yes, as it's a reflection of you as a potential borrower.

While the mortgage may be portable. You still need to meet the lenders criteria as applicants for a new mortgage.

Rubyminx

Thanks Thrugelmir,
That's unfortunate as I had the debts when we took out our original mortgage, but they weren't being paid via a DMP. I had the choice of adding them to the mortgage but chose not to as they are my debts.
Even if they are settled by the time we apply for a new mortgage, I guess I will be assessed as bad debt.
Could my partner apply on his own ? Would his application be affected as my partner ?
Rubyminx

Jon_B_2

In your opening statement you give the lender a bad smell. "Come into £10k, might just offer this to the people who lent me £20k".

Unless of course I have misinterpreted your post and you only have £10k left on the DMP.

amnblog

Can't see this working for you.

The DMP is detrimental to your credit file.

Forget moving until it is all settled and historical.

Rubyminx

Thanks AMNblog and Jon B.

Jon B - you didn't misinterpret but the reason I can offer 10k Is due to that being the sum I will inherit. It's not that I ' might just offer this to the people who lent me 20k'. I've been advised that, often, creditors will accept final settlement figures and one or two of mine might.

AMNblog - do you have any idea how long after the debts are paid off my credit score might improve ?

Thank you

amnblog

Much will depend on how the issues have manifested themselves on your credit file.

Mainstream lenders like Halifax are likely to be off the agenda for a few years.

Annisele

Rubyminx wrote: »

Could my partner apply on his own ? Would his application be affected as my partner ?
Rubyminx

Assuming you both own your current home, he's going to struggle to apply on his own.

The equity in your home is owned by both of you. If he uses that money to buy a house in his own name, most lenders will also want you to be on the mortgage.

Your existing lender still might be OK with you moving, and both being on the new mortgage. From the lender's perspective, currently you owe £133k on something worth £185k (so loan to value is 72% or so). If you used your equity on the new house, you'd owe something like £108k on something worth £160k (LTV 68%ish). I cant' see a new lender being at all interested.

You'd also have to check the terms of your DMP - if a bundle of equity gets turned into cash, they might want their slice.

Thrugelmir

Rubyminx wrote: »

Even if they are settled by the time we apply for a new mortgage, I guess I will be assessed as bad debt.

Full settlement would be viewed more positively than partial. Particularly if you were downsizing in value i.e. borrowing less.

ACG

The chances of you being able to get this through on the high street are as amn says going to come down to how everything is displayed on your credit report(s).

There is a (slim) possibility it could be done. If not then you are going to be looking at the adverse lenders but only once you have had the DMP for atleast 12 months.

I would suggest speaking to a broker. No harm seeing if you can port the mortgage I suppose but I would not expect it to get through.

Rubyminx

Thanks Anneseile,

How naive am I ? I didn't even think that needing a smaller mortgage would reduce the choice of Lenders !

Thanks ACG. I'll speak with our original Mortgage advisor.