Debt Management Plans have had a place in the market during the tough times and have assisted many customers in reducing their monthly outgoings. In brief terms, the DMP company arranges a reduced monthly payment amount to the customers creditors. However, some credit companies will see this as a breach of their original terms and may register defaults or an ‘arrangement to pay’ status position against the customers credit file. This has been quite a barrier and has often prevented mortgage lenders assisting the customer with finance.
As lenders compete for business, we are starting to see reviews of criteria options and some will now look to help those in a DMP up to 75% of the property value. The DMP must be paid off as part of the deal. If the DMP was paid off more than 36 months ago, then the lender will look at mortgage options up to 85% loan to value. There are a myriad of terms and conditions, as you would expect, but this is a great step forward and now opens doors to customers that may not have been helped before.
With this in mind, we have also seen at least one lender looking to help those who could be classed as ‘mortgage prisoners’. This could be where a customer is coming to the end of the product term and due to revert to the lenders variable rate. But since their last mortgage arrangement, new regulations have been implemented and the customer may no longer qualify for the same type of deal. Affordability calculations may have changed or another reason may affect their new mortgage options. Therefore the customer may be stuck with the current lender and unable to move. Some lenders have looked at these types of customers and launched ‘transitional’ mortgage options. These lenders look at moving customers away from their current lender, on a pound for pound remortgage, with the minimal of paperwork and no requirement to undertake additional affordability assessments where no further funds are being raised (and assuming no income changes since the previous arrangement). This assumes that the customer has conducted their current arrangement in an exemplary manner of course! This allowance to the lenders from the regulator is only available until 2016, when the EU Mortgage Credit Directive is implemented, so be quick!