Dmp and mortgage

[rumple123]

Hi all,

After 2.5 years of living in debt and burying my head in sand I have finally started to deal with the debts head on. I have been struggling to pay off the minimum payments to 5 credit cards whilst also repaying £366 a month towards a loan - as my credit score has got worse the interest rates are sky high- all cards and 2.5 k overdraft constantly at their limits, barely managing to make payments - would regularly get 3 x £12 default late payment fees monthly. I have called 3 of the creditors and they froze interest but after facing reality I had to contact StepChange and ask for help as I could t face calling the others. They suggested a DMP for 11 years paying £180 a month. This sounds like a good option as it would mean I had £400-500 more a month to live on and actually have money for food and emergencies. I am worried as I am due to remortgage in April 2021, I just signed up in April this year for a 2 yr fixed term. If I stay with my provider can they just renew my mortgage? Is there a possibility I wouldn't get any mortgage while on a long term dmp? I have NEVER missed a mortgage payment and am not in arrears but obviously my credit score will be zero so could my provider say they won't renew my mortgage? What would happen? After years of stress and having no money for any sort of life this seems like a prayer answered but I'm worried what will happen when my current mortgage term is up? I am sick thinking about all the interest I paid - £14k of credit card sent, a 12k loan which is now about £8k (I never defaulted loan payments and have kept up with the £366 instalments), my overdraft is £2.5k. As soon as I get paid all my direct debits come out and then the rest of them bounce. It's a horrible way to live', waking up with messages saying so and so not able to collect payment, your account is now in arrears, please add more funds to cover payment'. Any advice appreciated - should I take dmp? What about mortgage? I have no choice really as can't afford debt payments!

Your current provider will continue with your mortgage, it will just be the rate that changes.

Thank you for quick response. I only have

Worst case scenario is that your current mortgage deal ends and you pay your lenders standard variable rate for the remainder of the mortgage term (so you may not be able to access a new deal with cheaper rates). Hopefully your lender will allow you to transfer to another fixed term rate with them.

Could you get a couple of lodgers in to help increase your income?

Thanks, I hope so too. I've only had mortgage for a few years, after I got accepted for mortgage the debts began as I needed a bank loan for house repairs, however the repayment was not affordable (£366 monthly) hence pretty much all living expenses going on high interest CC from then until now (limits all reached) . I wish I hadn't bought big old house needing lots of repairs then I wouldn't have got bank loan and wouldn't have got in to this mess. Looks like I'm sticking with the same bank for 11 years then at whatever rate they want as I have no choice to move. I hope because I have never defaulted mortgage payments they will take that in to consideration. I think I'm just relieved that I have some support now and a plan, I'm just gutted it's gone this far and now I'm in a DMP for 11 years! Without it though in 11 years I'd still be broke but with the debts still as no matter how much I could pay in to them it wasn't even covering the interest so none of the debt being paid off. What a mess

As for lodgers my house is not in a good state of repair as I had a bad roof leak which I was able to get repaired structurally (very stressful as wasted £1400 on cowboy roofer ) however I would not be able to rent due to damage and not having any money to repaint / replaster.

It won't be a mess soon, if you get on that DMP then get a couple of lodgers in and that debt could be paid off twice as quick. As a PP said, all that will happen with your mortgage is that you will be transferred to a SVR. Your credit rating will start to slowly repair. To be honest, it's not all bad and look on it as a new beginning. How old are you?

x posts, you'd be surprised at how people will accept poorly decorated rooms for rent - if the price is right of course. Then you use that money to slowly refurbish the house so you can charge more to lodgers (can you tell I've done this!)

I let a room to a builder once, free of charge for 6 months, on condition that he help repair and decorate the house. It was a brilliant arrangement.

@NotSuchASmugMarriedNow1 that sounds like a dream! I'd love that!
@AwkwardPaws27 thanks for the positivity, much appreciated. I'm only 32 but yet to have kids, I just hope my foolishness and this dmp with not hinder having kids. Though to be honest I'm probably in a better position to now than I have been these passed few years.

I may use any spare cash I have to do up house and sell! Thanks for taking the time to reassure me, I was worried I would no longer be a candidate for a mortgage (not sure if that could happen once you are accepted?!)

Past few years
^^¥

While on dmp if I keep up with payments and obviously won't be opening any new credit agreements how will my credit score look? Low for 11 years and then recover after dmp settled or will it grow after a few years of no searches, defaults etc?

Just to add I am on a low income wage working in care (not a career for relative) I only take home around £1000-1200 a month, the mortgage costs £375, council tax £150 (as I missed payments so this is higher than the band price), loan was £366 and credit cards were looking for £70-£90 minimum payments a month (I had 5). I have no idea how this was sustained. I also need £100 a month for travel to work. I am not entitled to any benefits apparently.

@NotSuchASmugMarriedNow1 I really couldn't rent at the moment as I need the top floor to be rewired and there is not a ceiling in the previous leak damaged room!

Just to note OP, some mortgage providers do allow you to apply for a new deal with them without going through a credit check. All this means is that you would not be able to shop around for a better deal with a new provider but you may be able to apply for a new fixed rate with your current provider without going through affordability and credit checks.

How much equity is in the house? Would you consider selling and buying somewhere cheaper or is this not possible?

Who is it with? We used to be with nationwide and they used to just ask you to select which fix you wanted at the end of each term?
As pp said the worst case scenario is the variable rate. Why not look at that now and plug it into a mortgage calculator to see what it would be. But please make sure that when it comes up you apply for the best deal available with your current lender.

Op, if you sell your house you may not get a mortgage to buy a new one. You need to stick with the house you have, your fixed deal will just revert to their SVR once it ends and they may or may not agree to a further fixed deal.
Your current financial arrangements aren't working for you at all, so you have no choice but to get a DMP. You should also look at getting a further part time job e.g. In a bar, to supplement your income. And of course you won't qualify for any benefits! Benefits are not there to service debts of people who have overspent.
If you take away your monthly debt payments, you will see you have more than enough to live on.
As far as renting out a room, you could actually rent out your own bedroom as another short term measure. If that brought in £50 a week, that's over half your mortgage covered each month.

If it helps when me and dp.did our mortgage renewal with nationwide they didn't even run a credit check. We had a 2 year fixed, went in and said we basically wanted a 3 year fixed and they did and 'affordability check' on a piece of paper which I think was just a box ticking exercise and then did the mortgage for us
We never had anyone check our bank statements, employment details or debt information.

Thanks all, if I increased my income then would I need to call StepChange to change dmp budget as then I could afford to pay more than £180 a month. Thanks for the advice about the mortgage that's reassuring. I am with NatWest, not sure how much equity I have made improvements to the house but have not had it revalued. I also know my postcode is rated as desirable so I think the house's value increased 5% for the two years I've owned it without the improvements. If I based it on the price I paid I only have about 15k equity in it. Like a pp said I wouldn't want to sell as I may not get a mortgage. Unless of course the price had drastically increased and I bought a tiny bedsit with the profit and the little equity I have but this wouldn't be suitable for my circumstances. I'm not even sure that would be possible as I would probably need to settle debt with any profit from property sale? I really don't know.

Would it make more sense to remortgage your house and take the money out of the house to pay off the debt? Then you won't have the DMP on your file.

I'm sure you would end up paying much less interest in the long term aswell

@stopwining I couldn't realise equity I don't think as I've not got much, have an abysmal credit score already. Also it's a fairly new mortgage with only 30 or so instalments pair in total
Thanks all for responses