Remortgage After Debt Management Plan

Karen and Paul, 47 and 49, have a semi-detached house in Bromley valued at £340,000. Their mortgage balance is £198,000. Three years ago, they went through a period of financial difficulty and entered a Debt Management Plan, which they completed two years ago. All debts under the DMP have been satisfied and they have not had any further credit difficulties.

When their initial mortgage deal ended, their lender moved them onto its standard variable rate (SVR) of 8.1%. Their monthly payments jumped to around £1,600. They knew there were better rates available but had been told by their bank that they could not remortgage while the DMP was still showing on their credit file. They came to us after a friend mentioned that some specialist lenders deal with adverse credit remortgages.

A Debt Management Plan remains on your credit file for six years from the date it was registered, even if it has been completed and all debts settled. Many mainstream lenders will not remortgage applicants showing a DMP on their credit file regardless of how long ago it completed. The automated scoring systems flag it and decline without human review.

At 8.1% SVR on a £198,000 mortgage, Karen and Paul were paying well over the market rate. Every month they stayed on the SVR was money they could not afford to lose.

We approached two specialist adverse credit lenders from our panel that have specific appetite for remortgage applications where a DMP was completed more than 12 months before application. With two years elapsed since completion and a clean payment record since then, Karen and Paul were within the criteria of both lenders.

We pulled their credit reports from all three reference agencies to ensure there were no additional issues we needed to prepare for. The DMP was the only adverse item. We prepared the application with a full narrative: the DMP was completed, all debts were satisfied, their payment history since had been spotless, and the existing mortgage had been paid on time throughout.

The property's value of £340,000 against a balance of £198,000 gave an LTV of 58.2%, which is quite low. This helped significantly: the lender's risk is reduced at low LTV and this gave them more confidence to proceed despite the historic DMP.