Advice needed for mortgage after DMP
MBFF
Posts: 14 Forumite
Hi, looking for some advice as its been over 10 years since we looked at mortgages.
In 2012 we entered a DMP due to redundancy and defaulted on everything we owed, 3 credit cards (4k, 2k, 1k) a large loan (20k+) and our overdraft (1k) In total around 28k. We have kept payments up with Stepchange and increased payments to bring our original end date from 2020 to March next year which coincides with all of our defaults being 6 years old.
We are in a substantially better position now and pay Stepchange £400 a month and have just over 2k left to pay on it. The DMP has helped us live within our means and we have a healthier relationship with money than we had 6+ years ago. We now have 2 children of primary school age.
We have never missed payments on our mortgage or any other bills other than when we defaulted on the credit.
We are looking at moving house around the middle of next year, will our previous situation affect us? We would be completely honest and go through a broker but are wondering whether even though the defaults would no longer show on file if we would have trouble borrowing.
We have around 60k equity in our house and have a few thousand in savings for an emergency fund. We have salaries of 40k and 18k with 3k in bonuses every year (guaranteed)
We have no other credit other than the defaulted ones, we are both on the electoral roll, with stable jobs of over 3 years, our credit file shows mobile bills and a Very account which are always kept up to date and under 20% utilised, we have no overdraft on our current account and it always has money available. We had car finance 3 years ago which was paid in full and shows as such. I check all 3 credit reports religiously each month and they are accurate. The only question mark around our reports is we took out a Northern Rock Together mortgage for 100% 12 years ago for our current home and the loan element obviously appears as a separate entry (this wasn't included in the DMP and has been paid in a single payment with the mortgage each month), would this count against us or is it worthwhile adding a note to the file as this would be cleared at the same time as we moved and cleared the mortgage.
We currently pay £620 a month with Landmark (who took over the NR mortgage) and £400 to Stepchange so both of these would be free for any other mortgage payment if we were able to get one. We have very average outgoings as we budget to ensure we never get in the same position we were in. I have no idea on what our affordability for a mortgage would be, we have been looking at homes in the region of 280-300k, is this realistic?
Thanks in advance
In 2012 we entered a DMP due to redundancy and defaulted on everything we owed, 3 credit cards (4k, 2k, 1k) a large loan (20k+) and our overdraft (1k) In total around 28k. We have kept payments up with Stepchange and increased payments to bring our original end date from 2020 to March next year which coincides with all of our defaults being 6 years old.
We are in a substantially better position now and pay Stepchange £400 a month and have just over 2k left to pay on it. The DMP has helped us live within our means and we have a healthier relationship with money than we had 6+ years ago. We now have 2 children of primary school age.
We have never missed payments on our mortgage or any other bills other than when we defaulted on the credit.
We are looking at moving house around the middle of next year, will our previous situation affect us? We would be completely honest and go through a broker but are wondering whether even though the defaults would no longer show on file if we would have trouble borrowing.
We have around 60k equity in our house and have a few thousand in savings for an emergency fund. We have salaries of 40k and 18k with 3k in bonuses every year (guaranteed)
We have no other credit other than the defaulted ones, we are both on the electoral roll, with stable jobs of over 3 years, our credit file shows mobile bills and a Very account which are always kept up to date and under 20% utilised, we have no overdraft on our current account and it always has money available. We had car finance 3 years ago which was paid in full and shows as such. I check all 3 credit reports religiously each month and they are accurate. The only question mark around our reports is we took out a Northern Rock Together mortgage for 100% 12 years ago for our current home and the loan element obviously appears as a separate entry (this wasn't included in the DMP and has been paid in a single payment with the mortgage each month), would this count against us or is it worthwhile adding a note to the file as this would be cleared at the same time as we moved and cleared the mortgage.
We currently pay £620 a month with Landmark (who took over the NR mortgage) and £400 to Stepchange so both of these would be free for any other mortgage payment if we were able to get one. We have very average outgoings as we budget to ensure we never get in the same position we were in. I have no idea on what our affordability for a mortgage would be, we have been looking at homes in the region of 280-300k, is this realistic?
Thanks in advance
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Comments
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Anyone able to offer any advice?0
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I entered a DMP in 2011, paid it off a couple of years ago, was able to get a mortgage last October, the underwriters wanted an explanation of how I ended up in debt etc
It would be worthwhile as soon as you can getting a credit card and repaying in full each month0 -
If you're currently still paying the DMP, I think you'll struggle to get a mortgage to be honest. I think it's worth you speaking to a broker, they may be able to find a lender who will consider a mortgage.0
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Hi MBFF
There are lenders out there that would consider you for a mortgage even with an active DMP, however, they would generally restrict the loan to valuation they would provide to you, so you may need a larger deposit then you are considering or you may need to reduce the property valuation.
You need to speak to a Mortgage Broker who will consider the lenders available to them, as to what options you have.I am a Mortgage Broker.
You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice0 -
My_side_hustle wrote: »If you're currently still paying the DMP, I think you'll struggle to get a mortgage to be honest. I think it's worth you speaking to a broker, they may be able to find a lender who will consider a mortgage.Hi MBFF
There are lenders out there that would consider you for a mortgage even with an active DMP, however, they would generally restrict the loan to valuation they would provide to you, so you may need a larger deposit then you are considering or you may need to reduce the property valuation.
You need to speak to a Mortgage Broker who will consider the lenders available to them, as to what options you have.
The OP will have it paid off in 5 months, although with a few thousand in savings I would wonder why they don't get it paid off now0 -
Because I would rather have a months salary sat in savings in the event of an emergency that I could use without crippling us. I've already brought my end date of the DMP down by 2 years. The savings have stayed at 2.5k for about a year, our DMP includes a budget set aside for an emergency fund.
Anyway, thanks for the advice. I'm not interested in a mortgage whilst still in the DMP more looking for whether it would be an issue getting one after it's cleared and the defaults drop off. Plus whether the house value we are looking at are realistic?
Thanks0 -
Because I would rather have a months salary sat in savings in the event of an emergency that I could use without crippling us. I've already brought my end date of the DMP down by 2 years. The savings have stayed at 2.5k for about a year, our DMP includes a budget set aside for an emergency fund.
Anyway, thanks for the advice. I'm not interested in a mortgage whilst still in the DMP more looking for whether it would be an issue getting one after it's cleared and the defaults drop off. Plus whether the house value we are looking at are realistic?
Thanks0 -
I think the emergency fund is a fantastic idea and would recommend retaining that no matter what, especially as you have handled the DMP so well.
Likewise as my previous post, there will be lenders that will consider you once your DMP has been cleared, however, these won't be mainstream high street lenders.
With a deposit of 50 - 60k and a joint income of 58k, I would personally bring your expectations down slightly to around the 250k purchase price, to allow for a mortgage of 200k and associated purchase cost (SDLT etc). This would allow for the increased interest rate you would most probably face post DMP.I am a Mortgage Broker.
You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice0 -
Ok thanks. How would DMP affect us overall? If it's cleared and all defaults are clear from our reports why would our rate be higher? Would a lender be able to tell we had previously had a DMP in place?
I was under the impression all our reports would show is our mobile bills, very account and settled car insurance? Would it show all our current debts as satisfied as I thought they disappeared 6 years after the default date0 -
It would be clear and in flashing lights for anyone doing a credit search on you.
The rate would be higher as the lenders that open that doors to people who have been through / recently completed DMPs are few and far between, so they can charge a little bit more. Call it profiteering if you want, they would call it 'pricing appropriate to risk'
Have you run a credit report of your own? Its not just about your active credit accounts, as your previous ones will still show.I am a Mortgage Broker.
You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice0
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