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How will a DMP affect my home, mortgage or tenancy?

If you keep up with your payments to your debts and your rent or mortgage, your debt management plan (DMP) should have no direct effect on your home.

Payments to your rent or mortgage are considered a priority. This means they’re covered in your outgoings before we work out how much you can afford to pay towards your DMP. This ensures you won’t miss payments towards your home, keeping it secure.

However if you want to apply for a mortgage or a new tenancy agreement your DMP may affect it, so it’s good to be aware of situations where a DMP might impact your home.

If you’re on a DMP you may be wondering if:

  • A DMP will affect your home
  • You can get a new mortgage
  • You can remortgage
  • Your DMP will affect your home if you rent it
  • You can rent a new home

I own my home - will a DMP affect it?

If you own your home your DMP will have no direct effect on it.

However, a DMP doesn’t prevent your creditors taking court action and this could, in rare cases, have an impact on your home. 

If you miss several payments towards a debt a creditor could take court action to get you to repay it. In England or Wales this is known as a County Court judgment (CCJ), and in Scotland a decree.

If you have a CCJ or decree, creditors can take further action to get you to repay your debt. One option is to secure the debt against your home so that if you sell or re-mortgage the house, the debt will be paid off. This could happen whether you've missed payments to your CCJ or not.

In England or Wales this process is called a charging order. There’s a similar process in the Scottish courts called an inhibition.

In practice, court action is possible during a DMP, but it’s not common. It’s even less common for court action to result in a charging order or inhibition.

If you do receive court forms through the post, let us know so we can give you advice on how to respond.

Can I get a new mortgage on a DMP?

You’re likely to find it more difficult to take out further credit during your DMP, and this includes taking out a new mortgage.

A DMP will have an impact on your credit file because you’re paying less to your debts than the amount stated in the agreements you signed with your lenders. This means any other lender you apply to – including a mortgage lender – will see you as a higher risk and will be more likely to refuse your application or charge you a higher rate of interest.

It won’t be impossible to get a mortgage during your DMP, but it’ll be harder and you may not get the best deal. This won’t last forever, and once your DMP is finished and your debts paid off, you should find it easier to get a mortgage.

Nevertheless, you may still want to try getting a mortgage during your DMP, especially if you’re living in a private rented property where rents can often be higher than the equivalent mortgage payments. If you’re interested in getting a mortgage during or after your DMP, we have a specialist team that can offer you free mortgage advice.

Can I remortgage on a DMP?

Remortgaging is when you replace your current mortgage with a new one. You may want to do this during your DMP to reduce your monthly mortgage payments or release an amount of money.

Just like getting a new mortgage, it’s likely to be harder to remortgage during your DMP and you may have a limited range of options and no access to the best interest rates.

Will a DMP affect my home if I rent it?

A DMP won’t affect your current tenancy as long as you keep your rent payments up to date, and you pay off any arrears at an amount your landlord agrees.

Your rent payments are a priority so they’ll be taken into account when your monthly DMP payments were worked out.

If you have rent arrears, these are also a priority payment. If you’ve told us about them, we’ll have included a payment towards the arrears in your DMP budget. If payments to the arrears have been agreed with your landlord, or were set by a court, as long as you keep paying them during your DMP, no further action will be taken. 

If you have an emergency, for example a drop in your income one month, and you can’t afford to cover your rent and your DMP payment, let us know as soon as possible. Your rent and rent arrears should always be paid first, before your DMP repayments.

Can I rent a new home on a DMP?

A DMP won’t stop you renting a new property, although your debts could make it more difficult.

Private landlords and letting agents often perform credit checks before giving a new tenancy.  They generally rely on public information such as details of bankruptcy or court judgments. Your DMP can’t prevent your creditors applying for a CCJ or decree, so it’s possible this may have happened before or during your DMP, and this would make it more difficult to get a new private tenancy.

Landlords can’t see detailed information about your credit debts, default notices and other information held on your file with credit reference agencies. They can only access this if you give them permission.

Even if a landlord is unwilling to accept you for a tenancy because of information they find about your debts, you may be able to persuade them by offering a higher deposit, supplying additional references, or a guarantor.

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Helping you become debt free...

“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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© StepChange Debt Charity 2016