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Can I get a mortgage with an in debt management plan?

Getting a mortgage with a debt management plan is a real possibility for a variety of people. Read on to find out more! 

While there aren’t always simple answers to questions like this, ultimately, yes you can get a mortgage with a debt management plan. However, debt consolidation mortgages aren’t easy to come by. In this article we’re going to explain what debt management plans are and whether you’ll be able to have one of these and a mortgage at the same time. Let’s get started!

What is a debt management plan?

These plans are for people whose debt repayments have become unaffordable. To stop the debts spiralling out of control a debt management plann can be put in place to help you manage your debts in an affordable, cost effective way where you pay off your creditors gradually over an extended period of time. How this works is simple. You basically make a monthly payment to your plan provider and then they contact and distribute your money to your creditors accordingly. While this can be a great option for paying off any outstanding debts that you might have, it won’t be great for your credit score. Let’s take a look at why.

How will a debt management plan affect your ability to get a mortgage? 

If you are using a plan to pay your debts, the likelihood is that you’ll be paying slightly less per month than the originally agreed amount to pay back your debts. The problem with this is that, as you will be paying less than originally intended to, this will contribute to you having a poor credit score as it will be assumed you were unable to manage your commitments correctly.

While having a bad credit score doesn’t mean getting a mortgage is impossible, it does mean that getting a debt consolidation mortgage will be considerably harder. This is because you’re likely to get ruled out of having the best deals on the market. The reason is lenders will want to mitigate the risk of lending to someone with a poor credit rating by having a higher interest rate.

If you’re looking to consolidate debt in another way, this bit is for you. Some find that bad credit loans are another way to consolidate debt. The fact about debt consolidation loans is, they’re not ideal when you’re already in debt. However, bad credit personal loans can be a viable option to consolidate debt. It allows you to manage your debt into one payment, so you’re not paying off credit cards (even the ones you’ve used for balance transfer) and other personal loans. Debt consolidation loans are usually not secured loans – so you don’t need to be a homeowner.

Will my debt affect my ability to get a debt consolidation mortgage?

While your ability to get a debt consolidation mortgage could be affected by your debt management plan, this is going to vary between lenders. While a lot of lenders are going to look at your affordability and financial details, others may be willing to incorporate your existing debt responsibilities into whatever deal they offer you. For example, this may mean that you pay less back of the capital per month and pay a lot of it back towards the end of your mortgage term. This will be sort of similar to an interest-only debt consolidation mortgage.

If this isn’t quite what you had in mind or you think this makes for bleak reading then don’t worry, let’s go over some potential solutions!

How should I deal with this?

We recommend that you speak to an independent mortgage adviser as there are more than one way to skin the preverbial cat. A secured loan to consolidate your debts & reduce your monthly payments may give you access to better mortgages. It may be that the debt management plan can be consolidated into the mortgage. There are many variables but understanding your options is the start to a positive move forward.

For more on mortgage and remortgage deals, visit our Homepage to start your application. For other mortgage and money tips, click to our Articles section. Click here for more information on Bad Credit Mortgages.


Laura Waller

Laura Waller has been working in the mortgages industry since 2013, joining an independent brokerage in Essex. Laura has CeMAP 2 & 3 – Certificates in Mortgages Advice and Practice. Since then Laura oversees marketing for Mortgages Online, using her experience and expertise to write articles and blogs about mortgages and related topics.

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