Mortgage with a Debt Management Plan

Linzi155

I have been renting for 3 years (no payments missed) very comfortable and can easily manage all bills. I split with partner and house was sold Easter this year, of which I got a little money from. I cleared my feet and took kids on holiday. I still have a Debt Management Plan and have been told I have no chance of securing a mortgage. I don’t know what to do... the house I have isn’t big enough for kids and myself but local authority won’t/can’t help. I work full time and on paper can easily afford a mortgage. Does anyone have any advise? I am in Scotland incase that makes a difference. Thanks in advance.

csgohan4

the ongoing debt management plan Is your main hindrance and shows poor money management as you are not good with your money in the past.


Whether you pay on time every month is irrelevant because you have a debt management in place because you couldn't pay your debts in the first place.


There is no shame in renting, and you may afford to pay a mortgage now, but interest rates are rising and it is based on affordability of what you earn and stressed interest rates of +5% on top of current rates.


Perhaps get a good broker who is good with adverse credit and they can sit down with you and go through your credit file.

Lioness_Twinkletoes

Linzi155 wrote: »

I have been renting for 3 years (no payments missed) very comfortable and can easily manage all bills. I split with partner and house was sold Easter this year, of which I got a little money from. I cleared my feet and took kids on holiday. I still have a Debt Management Plan and have been told I have no chance of securing a mortgage. I don’t know what to do... the house I have isn’t big enough for kids and myself but local authority won’t/can’t help. I work full time and on paper can easily afford a mortgage. Does anyone have any advise? I am in Scotland incase that makes a difference. Thanks in advance.

If you are on a DMP then you aren't meeting your commitments to your creditors. This has two impacts:

1) Your credit file will be shot thereby scuppering any chance of a mortgage
2) If you do, by some miracle, get a mortgage your creditors may ask for a higher payment or even look to get a charge on the property.

If you can afford a mortgage (and therefore have a sturdy deposit, plus money for fees, conveyancing etc) then surely you can either pay a lump sum to your creditors, maybe even a full and final, or increase your payments to them.

Once your debt is cleared, then you can look to get a mortgage.

thelem

Linzi155 wrote: »

I still have a Debt Management Plan and have been told I have no chance of securing a mortgage. I don’t know what to do... the house I have isn’t big enough for kids and myself but local authority won’t/can’t help. I work full time and on paper can easily afford a mortgage. Does anyone have any advise? I am in Scotland incase that makes a difference. Thanks in advance.

Ignoring the DMP, ask yourself:
How much are you currently paying in rent? What size of house does that get you?

How much would you want to spend if you purchased a house? What size of house does that get you? How much do you have for deposit and moving costs? What is the monthly cost of that?

Do you still think you can easily afford the mortgage?

My advice is to concentrate on paying off the debts first, then think about buying a property. While you're doing that, move to a larger rented property if you can afford it.

ACG

There are lenders who will lend if you are in a DMP, but it will affect how much you can lend as either the repayments of the DMP or the contractual payments which you are no longer paying may be taken in to account.

It is VERY unlikely you are going to get a high street lender onboard. This is not me judging, it makes no odds to me what you do, but you are not paying back your debts as originally agreed and when you do come in to a lump sum of money you spend it on a holiday rather than the debts.

The other issue is being in Scotland, your options are reduced again being north of the border.

Definitely one for a broker.

Cakeguts

You may be able to afford the mortgage repayments but buying a house is expensive. Much much more expensive than renting because you become responsible for all repairs and all bills. What this means is that you have got to have savings. You have got to have savings because you have to pay for some of the house (the mortgage won't cover the whole cost) and you have to have savings in case something in the house needs repairing.

You have just demonstrated that you are still not good with not spending money. You went on holiday. Why did you spend this money on something that you didn't need? You need somewhere to live you do not need a holiday. You might want a holiday but you don't need one.

Instead of spending money on a holiday you could have paid some of your debts off or you could have put the money into a savings account.

Until you can stop spending money on things that you don't need and pay off your debts you are going to be better off in rented accommodation. If you buy a house and continue to not be able to manage money you run the risk of becoming homeless. There are no benefits to pay a mortgage so if you lose your job you have to be able to pay the mortgage out of savings. You don't have any savings because as soon as you get any money you waste it on things like holidays that you don't need.

CommitedToChange

Surely if you have money for a deposit, sols fees, moving fees and a emergency fund - this money should go towards paying your debts?

Doozergirl

I think you’d get a reception that had a bit more empathy, and perhaps some direct experience, on the Debt Free Wannabe board.

ACG

Doozergirl wrote: »

I think you’d get a reception that had a bit more empathy, and perhaps some direct experience, on the Debt Free Wannabe board.

You could have someone with all the empathy in the world, which is great. But it does not answer the question or get them a Mortgage. The only way our OP is going to know if they can get a Mortgage is by speaking to a broker as the devil is in the detail for something like this.

It will depend on when the DMP was started, size of deposit, how it all appears on the credit report etc etc. But someone experienced is going to need to look at the credit report.

Cheeky_Monkey

If you are renting a house that is too small for you and your kids, why don't you just rent a bigger one?

Kent77

I have a DMP with around £7k left to repay.

I received a full mortgage offer from Halifax last week on a rate of 3% fixed, 85% LTV.

Get yourself a good broker- it is far from impossible.