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Applying to remortgage can feel even more stressful if you’ve had a debt management plan (DMP) or are still waiting to complete one.
But while having an adverse credit history can make things more complex, there are solutions available that could help. To give you a clearer idea of what’s involved, we answer some of the most important questions about remortgaging with a DMP.
It may still be possible to remortgage when you are on a Debt Management Plan (DMP) or after you have completed one.In both cases, while it may prove more challenging to have your application accepted, you can benefit from seeking specialist advice.
There are providers that can help in that regard, and they may be able to offer more flexible terms compared to high street mortgage lenders. At Willows, we work with specialist mortgage providers that will often accept applications from people with DMPs. To find out if you are eligible, get in touch to discuss your options.
In This Guide
If you have entered a DMP, it will remain on your credit file for six years, starting from the moment it was paid off or defaulted.
The length of time passed since the completion of a DMP is taken into account by some lenders, which may help when it comes to approving your application.
The reason lenders focus on the length of time passed since the completion of a DMP is mostly due to affordability. Having previously been on a DMP, it is understood that you were struggling to keep up with your debt repayments.
Most mainstream mortgage providers usually require your DMP to have been settled for at least 1-3 years before they will consider lending to you.
This isn’t necessarily the case with specialist lenders, as they often take a more flexible approach.
The longer the time passed, the more lenient lenders tend to be, as there is a better chance you will be financially stable enough to maintain the repayments without defaulting.
Provided you haven’t accrued any unmanageable debts since completing your DMP, waiting a while will also give you credit score more time to recover, which can help increase your chances of being approved for a new mortgage.
While your mortgage options will be more restricted if you have an active or historical DMP on your account, you may still be able to find a remortgage deal with affordable rates.
When assessing your application, lenders will look at things like your:
Rates offered by specialist lenders tend to be higher than those offered by high street mortgage providers.
This is due to the higher level of risk involved on their part, so the higher interest rates give them more protection against a potential default.
Each mortgage provider has its own lending criteria, which means the amount of equity needed tends to vary.
One of these factors is the loan-to-value (LTV). The lower your LTV is (below 80%, for example), potentially more deals you will have access to.
Speak to a member of the Willows team to see if you have the right amount of equity needed to remortgage your home.
Every lender’s criteria is different, so there are no fixed rules when it comes to how long you should wait to remortgage after settling a DMP.
In general, the longer you wait after finishing a DMP, the more open lenders tend to be with a mortgage application. This may help you to secure more favourable terms.
The most important thing to focus on when remortgaging is to ensure that you can afford the proposed monthly payments for the full duration of the term.
As long as you are in a position to afford the new mortgage, this will help to support your application, whether you are still on a DMP or have an historical record on your credit file
To get started with your application or to see if remortgaging is the right option for you, get in touch with the Willows team who will be happy to help.
Most lenders tend to view settled DMPs more favourably than active DMPs, even though they will remain on your credit file for six years.
In general, the older the DMP is, the more options you will have.
So, if you settle a DMP now and then apply to remortgage a short time after, any deals offered to you will probably not be as favourable as those that settled 1-3 years.
If you are currently on a DMP, this will be included as a financial commitment in your affordability assessment unless you plan to settle it out of the mortgage funds. Lenders will want to understand how much you spend each month in relation to your income. This helps them assess the amount you could potentially afford to repay each month.
If you are employed, lenders will usually ask for the last 3 months’ worth of payslips to demonstrate that you have a stable income.
For people that work as freelancers, you will likely be asked to submit your year end accounts for the past 1-2 years.
You can get more insight into the type of information you will be asked to provide with your application if you speak to one of our expert mortgage advisors.
If you have a DMP, naturally you will be concerned about further damaging your credit score by applying to remortgage.
Before you proceed to a full application, we will give you a quote based on the initial information you provide to us.
This will involve a soft credit search and will not have an impact on your credit score. Lenders will not be able to see this on your credit file, as it does not leave behind a footprint.If you are matched with a lender and wish to proceed to a full application, this will involve a hard credit check, which will be recorded on your credit file.
Remortgaging through a high street lender can be more difficult if you have an active DMP or have recently settled one. At Willows, we have years of experience helping people remortgage with DMPs – whether it is currently active or completed.
That’s because we work with specialist lenders who offer mortgages to people with adverse credit histories. Rather than solely relying on automated algorithms to make a decision, our lenders focus on human input, so each application is assessed on a case-by-case basis.
Getting a quote won’t affect your credit score
If you are unsure about applying through a high street lender and want to explore all your options, then it makes sense to consider using a broker.
Willows has a long track record of helping people with DMPs to find affordable deals, using our experience and expertise to your advantage.
To find out more about how we can help, you can speak with a member of our team today by calling 01656 766 158.
If you have a question – we’d be happy to talk to you – simply call us…
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Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Authorised and regulated by the Financial Conduct Authority
Firm Reference Number: 670052
Company Number: 6678545 (Registered in England and Wales)
This document outlines the services we provide. If you need clarification, please contact us at 01656 766158.
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Other finance options may include:
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We offer an advised mortgage broking service and provide enough information for you to make an informed decision.
We are not independent financial advisers. Free debt advice is available from the Money Advice Service.
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Lenders may also have their own privacy policies which will be provided to you.
We charge a broker fee upon loan completion. The average fee is approximately 5%, depending on your situation.
Fee details:
No refund is offered after completion. You may pay upfront or add the fee to your mortgage. Fees and commission will be detailed in your ESIS and Mortgage Agreement.
You will receive a Mortgage Agreement and an ESIS document detailing:
You may cancel your application anytime before completion without any charge. Mortgages cannot be cancelled after completion.
Missing payments can lead to charges, repossession, and negative impacts on your credit rating.
Consolidating debt may result in higher long-term interest. Securing debt against your home increases risk.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
If you wish to complain, contact us at:
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Tel: 01656 766158
You may be able to refer your complaint to the Financial Ombudsman Service.
We are covered by the FSCS. You may be eligible for compensation of up to £85,000 per person per firm for mortgage advice and arranging.
More info: www.fscs.org.uk
After processing your application, you’ll receive a Mortgage Agreement and have a 7-day reflection period.
Contact us during this period with any questions. To proceed, sign and return the agreement.
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