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Applying for mortgage with DMP in place?

(15 Posts)
Peanutbutternutter419 Sun 17-Jan-16 19:52:00

DH and I are in the process of applying for first mortgage. I have been given some money from a family member and have been adding to the savings pot whilst DH has been concentrating on clearing his debt (from before we were married). He is down to one debt which is currently paid through a debt collection agency. He has a repayment plan in place and owes around £7k.
The agency recently called and made my DH an offer of paying £3500 to clear the debt and made it clear this would be noted as full and final settlement of the debt.
My question is, would we be better off using my savings to pay this amount and clear it or is it better for him to just keep paying the monthly payment? Are mortgage applications affecting if a DMP is in place?

Any experiences/opinions would be great! TIA

19lottie82 Sun 17-Jan-16 20:10:44

Yes of course a mortgage app outcome will be affected by a DMP. In fact I'm pretty sure it would be a total no go....... But I could be wrong.

Joining finances with someone with a DMP is a bad idea, especially if your credit record is good.

I can't see anyone giving you a joint mortgage if he's on a DMP. Would you be able to make a sole application.

19lottie82 Sun 17-Jan-16 20:11:56

PS is he actually on a "proper" DMP? Or is he just paying off debt to this one collection agency?

Have you looked at his credit file?

ClashCityRocker Sun 17-Jan-16 20:14:44

I would suggest taking the mortgage in your name only if possible.

If not, it might be worth speaking to a broker - I didn't think there was much chance of getting a mortgage if you had a debt management plan in recent history, but that's just something I read on another forum (MSE) so don't know if it's true.

Peanutbutternutter419 Sun 17-Jan-16 20:15:21

My credit score is excellent (999 to be precise!) but a sole application is a no go as I jut wouldn't be offered enough. We are expecting DC no.2 and really need to upsize so figured that we may as well buy as we are both on good incomes and have a nice deposit saved after years of renting.
Do you have an advice one a part payment to settle the debt before we start applications?
Thanks for the advice so far!

Peanutbutternutter419 Sun 17-Jan-16 20:16:44

Sorry posted before I saw your second post Lottie.
As far as I know it is just a monthly payment to the debt collection agency for one debt?

19lottie82 Sun 17-Jan-16 20:17:43

Again, is he actually on a DMP?

Settling the debt will be a good thing in terms of clearing his credit file of any nasties but it's not going to have an immediate effect, which will determine a mortgage application.

Check his credit file and see what it says.

19lottie82 Sun 17-Jan-16 20:19:38

Ah OK that's not a DMP then, which improves things.

You really need to look at his credit file and see if he has any late payments or defaults showing up (from the last six years). If there are a small amount that aren't too serious a mortgage may be possible. If this is the case I'd go see a mortgage broker and see what they say.

ClashCityRocker Sun 17-Jan-16 20:19:47

So for it to be in the hands of a debt collection agency presumably he's defaulted? This could affect his chance at being accepted.

I know when we got our mortgage our combined credit card debt of 1.7k would have reduced the mortgage offer by 30k and we were advised to pay this off before finalising our application. We didn't shop around though hindsight

ClashCityRocker Sun 17-Jan-16 20:21:11

But yes, definitely check his credit file.

Peanutbutternutter419 Sun 17-Jan-16 20:21:25

His credit score is just in the good and he has got a credit card which he uses for fuel and clears each month which seems to be helping push it up further.

TheoriginalLEM Sun 17-Jan-16 20:21:49

please be very careful about the offer to settle. these companies often do this and then in a few years you'll get a letter from another company who the remainder of the debt has been sold on to. This has happened to us a few times and we have had to fight hammer and nail to get them to back off.

I would do my utmost to pay off the debt and then once debt clear try for a mortgage as they wont consider you while the debt still exists.

Peanutbutternutter419 Sun 17-Jan-16 20:27:30

I'm sorry he doesn't know if it is an actual DMP, he just assumed that's what it was. He has complete control over how much he pays and can repay as much or as little as can be afforded and as I said before, he can make offers for a lump sum amount to clear it.

He defaulted on the loan when he was made redundant around 5 years ago. Unfortunately he became depressed and ignored the debts causing them to spiral. I understand this went on for quite a few months before his ex pushed him to sort it all out and set up the payments.
He has been repaying these for 4 years and has not defaulted on anything else in this time. He had 4 different payment plans in place when I met him and he is down to the last one now.

ClashCityRocker Sun 17-Jan-16 20:28:00

Don't get over obsessed about the credit score; it's just a number, the lender won't see it and each bank has their own algorithms for determining who to lend to. Other than a vague indication, it's pretty meaningless.

Has he got any defaults on his credit file?

ClashCityRocker Sun 17-Jan-16 20:29:42

X-post, sorry.

Sounds like he's done a good job. If they won't lend to him now, in two years time the last of the defaults should be gone. But definitely worth seeing a broker, I think.

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