Quick advise please

Indout96

Looking for help from someone more knowledgeable than myself on behalf of my daughter

She bought a flat 18 months ago with a deposit gifted from us and a sub prime mortgage as she has a debt management plan in place (unfortunately via a paid company)

The mortgage is due to be re-negotiated in 6 month and although the DMP is reduced and she is overpaying it it will not be clear by the time of the new mortgage so she is looking at shifting this to a personal (Bank) loan

The load would cover the DMP and that is all, no extra will be taken and the loan will then be the only debt she has (the reasons for the DMP no longer exist and she is now extremely responsible with money)

Although this is consolidation are we correct that the building society would look on this more favorably than a DMP when trying to get a re-mortgage from a High Street lender.

She is calling after work to discuss this tonight so I am just looking for opinions on which would be better from the point of the building society as we have not had a mortgage for 15 years so are not really up with current thinking on aplications.

Thanks in advance

ManyWays

A mortgage lender is unlikely to be impressed that she took a loan to clear debts in a DMP. High street mortgage lenders like to see defaulted debts or debts in payment arrangements to have been cleared at least a year before the application, preferably two years.

She probably neeeds to get a new 2 years fix from her current lender.

Also a personal loan to clear the DMP will be very expensive. This would be a mad thing to do.

I suggest she switches to a fee free DMP, so it will end sooner. And looks at other ways to speed up the DMP. How long has it been going? How many of the debts have been sold to debt collectors?

Indout96

Thanks for your reply, I was thinking that way but did not know if I was too out of date.

I will find out more when she arrives after work but it gives us another perspective

elsien

Any lender will be looking at her debt and payment history. Which will be pretty much the same regardless of whether the DMP is still in place or she gets a loan at the time of the mortgage.

sourcrates

The average cost of running a debt management plan using a fee paying company can be around £5000.

That includes the one off set up fee, and an on going monthly management charge, that`s 5k that is basically wasted, and could have been used to reduce her debt, best advice is to ditch said fee charging company tomorrow, and either go self managed or with stepchange.

Indout96

Thanks all

She called round last night and we talked through the options and she will not get the loan but just work on paying it all off.

She will be looking at signing up on here with a view to ditching the company and moving to stepchange

thanks for your help

sourcrates

All she has to do is provide the DMC with 30 days notice of cancelation, then stop making payments to them.

In a few weeks it will filter down to her creditors that payments have stopped, they will then write to her, and she can either pass the whole thing over to the likes of stepchange, who will set up and manage a DMP for free, no charge whatsoever, or she can take control herself, and make separate arrangements with each of her creditors.

By doing this she can save the monthly management fee, which is about £45 a month on average, because currently she`s just throwing away that money, so it can make a big difference over time.

ManyWays

And her creditors will be delighted if she changes to Stepchange. For the same monthly payment they will get more, with no fees being deducted. So she does not need to worry about being taken to court, or the creditors starting to add interest again, it is not going to happen.