DMP and getting a new mortgage- payments/affordability?

Olivia42

Hi, I know this is the bankruptcy section but I couldn’t see a section for DMPs so hope it’s ok to post here, let me know if not. I’m looking for some advice as to how this situation might work. 

My husband and I have been in a DMP for just under a year (default dates latest Jan 2020) and have another 6 to go. We own our house (with a mortgage). However, we need to move areas as soon as we are able to. Not really wanting to go into reasons for this as it’s not what I’m looking for advice for- 2023 would be ideal, but it could wait until 2026 when we are out the plan if there was no alternative- it’s not that urgent that we would consider selling and renting. House prices in the new area mean that we would be looking at having to get a bigger mortgage than we have now. I have done lots of research etc and I think it would be possible through a broker to get a new mortgage, but I’m not sure on the amount. Because all of our spare income goes on the DMP, it seems like we wouldn’t be able to borrow that much more because there is no extra income. I’m very likely to have a new job by then (just progression in my current job) with a high enough salary increase to cover the additional mortgage payments (and probably increase the DMP payments as well). But if I got that wage increase, I have to tell the dmp provider so how would I put it towards the new mortgage instead of the DMP? Can someone advise as to how this would work considering DMP payments are flexible, I’m unsure as to how a mortgage provider would calculate this because of the flexibility element. And please don’t tell me just to wait until the end of the plan- I would much prefer to throw as much money into it as possible so we can pay it off then move, but I need to understand all the possibilities. 

MinuteNoodles

You have to inform the DMP of any changes to income.

Any negative entries on your credit record lose impact as time goes on...4 years after the last one you'll find it much easier to get a mortgage although you may be offered slightly higher rates. 5 years on they'll have little to no effect.

One option you've not considered is renting where you want to move to and letting out your existing house until you're in a position where you could get a mortgage without any trouble. You'd have the rental income to cover the mortgage and hopefully generate additional income from your current address. If it's only for a year or two you should probably be able to get permission to let from your lender rather than having to take out a commercial mortgage.

MovingForwards

If you post on the mortgage board there is a broker who specialises in adverse credit clients, he will be able to say what options might be available based on current / pre-Covid criteria, however criteria changes so it may be completely different by the time you are ready to move.

DMPs have to be running satisfactory for a minimum of 12 months before a mortgage can be applied for.

MEM62

MinuteNoodles said:

One option you've not considered is renting where you want to move to and letting out your existing house until you're in a position where you could get a mortgage without any trouble. 

This has probably already been dismissed as it would not work financially.  The income on the rent for their house would be taxable.  They would also have maintenance on their house, agency fees, insurances, loss of rent during void periods etc etc.  Therefore, there will be a gulf between the net income they receive from their property and what they would pay in rent on something similar.  If the OP is already on a DMP this is hardly likely to be affordable.     

Olivia42

MEM62 said:

MinuteNoodles said:

One option you've not considered is renting where you want to move to and letting out your existing house until you're in a position where you could get a mortgage without any trouble. 

This has probably already been dismissed as it would not work financially.  The income on the rent for their house would be taxable.  They would also have maintenance on their house, agency fees, insurances, loss of rent during void periods etc etc.  Therefore, there will be a gulf between the net income they receive from their property and what they would pay in rent on something similar.  If the OP is already on a DMP this is hardly likely to be affordable.     

Yes that’s right. Not really an option for us as the rental market in the new area is not great and a basic property there would cost around £700 more than the rental income for our house, so not really viable. I would rather wait the extra years to be debt free, as long as we get there eventually that’s the main thing. What I’m really looking to know is how creditors would respond to an increase in payments due to a wage increase followed by a decrease back to the previous payment so the extra money can go towards the new mortgage. Or whether that’s even possible. It may just be that we end up putting all the money into the plan as that should reduce the time on the plan considerably. But things might change in the coming years (reason for wanting to move is to support family) so I just wanted to know if it was a terrible idea or even feasible.