Last reviewed on 21st November 2023 by Martin Alexander (Mortgage Advisor)

Applying for a mortgage after a debt relief order (DRO) can be daunting. Many borrowers assume getting a mortgage is impossible, but that isn’t the case.

Due to having had a DRO, lenders will base their assessment mainly on the details of the DRO. This can involve the dates of when the DRO was registered and when you were discharged.

The reasons for having had a debt relief order will also be taken into account. Your current financial conduct will also be a factor in which lenders may or may not be suitable.

It’s important to understand that each lender will have unique criteria. Some lenders are more likely to decline a mortgage with a debt relief order, whereas others may be more suitable.

Approaching a high street lender will likely result in a declined application, and you may need a specialist lender depending on your circumstances.

Our advisors specialise in mortgages involving debt and bad credit. Based on a borrower’s circumstances, our advisors can pinpoint the most suitable lenders to improve the chance of mortgage approval.

What is a Debt Relief Order (DRO)?

A debt relief order can help you manage the debts you cannot pay. For instance, a DRO will allow you to be exempt from paying certain debts for a fixed period, typically 12 months.

When the DRO ends, creditors will write off your debt. As a result, you’ll no longer need to pay these debts, which can help you to get your finances back on track.

Can I get a mortgage with a DRO?

You can get a mortgage once you’ve been discharged from your DRO. Some lenders require applicants to be discharged for at least three years before applying. However, a mortgage is possible starting one year after your discharge date.

If you’re in an active DRO, then you won’t be able to get a mortgage just yet. Being in a DRO will prohibit you from borrowing large amounts of money. For this reason, a mortgage would be out of the question.

How soon after my DRO can I apply for a mortgage?

You can apply for a mortgage one year after you’ve been discharged from your DRO. That said, waiting until three years can give you more lenders to choose from and better rates.

Most lenders require up to six years before considering mortgage approval. Still, a handful of lenders may offer you a mortgage much sooner. Nonetheless, you’ll still have to wait 12 months from the date of discharge, and your credit file needs to be intact since discharge.

Lenders pay attention to the discharge date as the chances of mortgage approval improve as time goes on. Lenders will only consider lending after 12 months of discharge so they can assess your credit affairs following the DRO.

Will I need a larger deposit because of my DRO?

If your discharge was less than three years ago, you may need a minimum 30% deposit.

Having less than a 30% deposit can make it difficult to find a mortgage. On the other hand, if you’ve been discharged for at least six years, you can get a mortgage with a 5-10% deposit.

How much can I borrow if I’ve had a DRO?

Having had a DRO will make you a high-risk borrower. Only some lenders will consider you, and you’ll be limited in how much you can borrow. If you are eligible for a mortgage, the amount you can borrow will differ from lender to lender.

Most lenders will only lend between three and five times your annual income. So, the amount you can borrow will mainly depend on your income.

Lenders will also factor in your outgoings as well as what you earn. Underwriters need to be sure that the loan is affordable. Having financial arrangements such as vehicles on finance may also hinder this part of the application as it will minimise the amount you’ll be able to borrow. The fewer outgoings you have, the better.

What if I’ve had a restriction placed on my DRO?

If you’ve failed to comply with the terms of your debt relief order, you may be hit with a restriction on further borrowing. This is known as a debt relief restriction order or a DRRO.

Official receivers place restrictions to minimise further lending to the individual so that their credit doesn’t spiral out of control.

If you have a DRRO, you must speak to an advisor. This is because the length and terms of the restriction will vary for each individual. Once an advisor understands the terms of your DRRO, they can provide you with a tailored answer.

How does bad credit affect a mortgage after a DRO?

You’ll probably have other credit issues if you’ve had a debt relief order. The type, severity and date of your credit issues will all play a part in which lenders are approachable and whether or not a mortgage is possible.

Getting a mortgage after a DRO is possible with the following credit issues:

• Late payments and arrears
• CCJs and defaults
• Repossession
• Low credit score

Applying for a mortgage after a DRO requires specialist knowledge. Approaching a lender yourself will likely result in your mortgage being refused. Being refused will damage your mortgage chances, so get professional advice before applying.

An excellent place to start your mortgage journey is to check your credit file. Lenders will check your credit reports, so it’s wise to check them beforehand. You’ll then know what your credit file shows so you can prepare your approach accordingly.

Specialist debt relief order mortgage advice

If you’ve had a DRO and need a mortgage, get in touch. You can speak to an advisor who can guide you through the process. They’ll inform you of whether or not a mortgage is possible and the amount you’ll be able to borrow.

Our advisors specialise in complex mortgage cases. Furthermore, our advisors have access to every UK lender. Call us now on 0800 195 0490 or make an enquiry to get started.