Lenders often have measures in place to protect themselves.
They check on many details of borrowers
One thing they don’t like to see is a DRO on someone’s record.
Read on to find out what this is and what it means for potential borrowers.
What is a debt relief order?
A debt relief order (DRO) allows people in England, Wales and Northern Ireland with low levels of debt and very few assets to freeze the money they owe. (It isn’t available in Scotland.)
For many, the DRO provides a much-needed break from the stress and anxiety debt can cause by stalling outstanding bills, loans, and interest for 12 months.
If their circumstances remain the same after that period, these debts are wiped completely.
However, using a DRO will impact your ability to borrow money in the future. (Similarly, having a repossession will also impact your credit score.)
Can you still get a mortgage after having a DRO?
Yes, you can still get a mortgage after having a debt relief order. However, it will be more challenging, especially for the 6 years following the DRO.
How to secure a mortgage after having a DRO
To improve your chances of securing a mortgage after a DRO, you can take try the following:
Find an alternative lender
There are specialist lenders for people with poor credit histories, including those who have had a DRO.
These lenders may be willing to consider your application. But they will be highly likely to offer less competitive interest rates and ask for a larger deposit.
A mortgage broker can help you find the best mortgage deal for your circumstances.
Rebuild your credit history
This can involve paying bills on time, avoiding missed payments, and using credit responsibly. It can take a few years to do, so isn’t ideal for everyone.
However, if you are able to rent or – even better – live with relatives during this time, you may be able to save money towards a deposit.
Sell your property for cash
If you currently have a property that you need to sell, you could sell it for cash in order to have the capital to pay off debts and/or put down a deposit somewhere else.
This solution will mean selling your property below market value.
However, it has benefits such as a fast sale time and guaranteed sale (cash buyers usually don’t have mortgages so can buy outright without relying on a chain to complete).
