Debt consolidation mortgages

If you currently have a mortgage, or own your property outright, you can remortgage your home which means getting a new mortgage, either with your existing lender or a new one. Even if your current mortgage has a duration of 30 years or more, you don’t have to stay tied to the same one for that length of time.

Remortgaging is common and can help you to get a better deal and take advantage of good rates. You can see it as reevaluating your finances and finding the best deal to ensure you’re not paying more than you need to. Just like you might do with your utility bills.

How much equity is in your property, its current value and what kind of loan-to-value (LTV) percentage you want will all affect what kind of mortgage you can get. Working with a specialist remortgage broker (like us!) is the best way to make it simple and easy. Get started online.

People often remortgage to consolidate debts as a way to help them manage their outgoings.

Remortgaging can help consolidate debts in two ways:

• You can release the equity that’s in your property. This means you can free up a lump sum of money and use it to repay your debts. 

• You can reduce your monthly mortgage payment. This means you can free up money to repay your debts. 

You should always speak to a professional mortgage broker when you want to consolidate debts by remortgaging. Our Mortgage Experts can look at your options and advise you on the best thing to do to be able to manage your money.

Read more in our Guide: Debt Consolidation Options for Homeowners.

In many cases, remortgaging can be an effective way to stabilise your finances and pay off some existing debts.

Consolidating your debts into one monthly payment can be a lot more manageable and easier to keep on top of and can also make them more affordable overall.

Remortgaging may also make your monthly mortgage payments smaller if you already own a large portion of the house, as you may be able to negotiate reduced payment terms, or switch lenders to get a better deal.

The main benefit of remortgaging is that you’ll receive a large lump sum, which is useful to have if you’ve got other debts stacking up.

Your remortgaging options are:

• Stay with your existing lender and apply to borrow more

• Remortgage with another lender

• Take out what’s called a second charge mortgage - a second loan that’s secured against your home and runs alongside your main mortgage. It can be with another lender

Before you commit to debt consolidation with a mortgage, it’s a good idea to explore all your options for paying off debts: 

• Use savings or investments - it’s best to use a financial advisor to do this.

• Take out a loan that isn’t secured against your home - you could get a better interest rate.

• Talk to your current lender - they might have deals for existing customers.

• Shift your debts with a balance transfer credit card - there are plenty of 0% and low interest rate balance transfer credit cards on the market.

• Ask a family member to help.

Whatever you choose, it’s best to get help from an expert mortgage advisor. Our advisors have seen it all - and they’re no strangers to tricky situations! Make an enquiry.

To qualify for a debt consolidation remortgage, you’ll have to pass a number of checks from your lender to make sure that you’ll be able to pay off both your existing debts and your increased mortgage payments. This will include a credit check and will also depend on the value of your home, what percentage of it you own and how much you want to borrow.

They might also ask you to sign an undertaking before the mortgage is approved, which essentially states that you agree to pay off your debts in full on completion.

There’s also the option of taking out a second charge mortgage, which is a type of secured loan which uses your home as security, which allows you to keep your original mortgage, which can be preferable if you’re on favourable terms, such as a good interest rate.

To qualify for a debt consolidation remortgage, you’ll have to pass a number of checks from your lender to make sure that you’ll be able to pay off both your existing debts and your increased mortgage payments. This will include a credit check and will also depend on the value of your home, what percentage of it you own and how much you want to borrow.

They might also ask you to sign what’s called an ‘undertaking’ before the mortgage is approved, which is an agreement that you’ll pay off your debts in full when your mortgage completes.

There’s a few important things you should consider when thinking about remortgaging to consolidate debts. They’re all things you should think about so you can effectively remortgage to free up money, not to put yourself in a worse financial situation. 

Here’s a few questions to ask yourself:

Will my new mortgage rate be lower than the interest on my current debts?

If you’re not getting a better deal on your interest rate, then there’s not much benefit to paying off your debts this way, other than you’ll be making just one monthly payment.

Will I end up paying more in the long run?

Mortgages are a long loan. If you’re planning to pay off your debts sooner than the mortgage term, consider how much more interest you’ll be paying over the course of the mortgage. You can then weigh it up against your current credit commitments. 

Will I get charged for ending my current mortgage early?

Check to see when your current mortgage deal runs out, and if you have to pay a fee for ending it early. If you do have to pay a fee, you’ll need to weigh up if the new deal is worth it. 

Am I on repayment or interest-only?

If you’re switching to an interest-only mortgage to consolidate your debts, then you’re really just putting off tackling the debt. It’s best to go with a repayment mortgage to make sure the debt is paid off. Learn about the different ways of repaying your mortgage in our Guide.

Can I make overpayments?

Some mortgages will penalise you for paying extra month to month. That’s why it’s a good idea to find a remortgage option that allows overpayments. It also means that you’ll have the option to chip away at your debt quicker.

Can I afford for my monthly repayments to go up?

Will you still be comfortable with increased mortgage payments on your current income? If you’d had problems paying debt in the past, have a think about how bigger payments will affect your financial situation. checkmyfile* is a good way to check your credit history and keep on top of your credit activity.

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