Debt Consolidation Remortgage
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Debt Consolidation Remortgage
Sam from JB Mortgages talks us through remortgaging for debt consolidation.
What is a debt consolidation remortgage and how does it work?
A consolidation remortgage is when you decide to consolidate unsecured debts onto your mortgage. You’re securing your debt against the house by adding it to your mortgage loan.
When you are coming to the end of your fixed rate, it could be a good time to speak with your mortgage broker about this. We will look at how much it would cost to add your debts onto the mortgage.
If you decide to go ahead, when the remortgage completes your lender will transfer the additional money into your bank account. You can then repay your existing credit providers.
Is it a good idea to remortgage to clear debt?
Everyone’s circumstances are different, so we would advise on a case-by-case basis. Remortgaging to clear debt can be a good idea because it can vastly reduce your monthly outgoings. If you’re paying thousands of pounds each month onto credit cards that are on a high interest rate, consolidating that debt onto your mortgage could really reduce your monthly payments and help with budgeting.
If you’ve built up a good amount of equity in your home and your priority is to reduce your monthly outgoings, it can be a really good idea.
Can you consolidate debt twice?
You can, but mortgage lenders need to be responsible. So if it’s the second time you’re looking to consolidate unsecured debt onto your mortgage, the lenders will ask extra questions.
They may ask about the circumstances that have led to you needing to consolidate again. They then decide on a case-by-case basis whether to allow it.
Can I remortgage with bad credit to pay off debt?
That’s quite a common thing. If you’ve got bad credit we can still look at remortgaging to consolidate some debts. Not all mortgage lenders will do that, but we can access lots of different providers who are happy to work with clients who have had credit issues in the past.
Can you remortgage with credit card debt?
Again, it’s quite common. If you’ve got credit cards with high balances, they can be quite expensive each month, especially if they’re off the 0% interest period. It can be a good idea to look at consolidating those credit cards onto the mortgage.
A common example is where people buy a home that needs a lot of work doing on it. They might pay for that work on the credit card. Then, once it has been done, they look to consolidate those credit cards onto the mortgage.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
What types of debt do mortgage lenders consider?
Any unsecured debts, really. Mortgage lenders will allow remortgaging for consolidating credit cards, overdrafts and unsecured loans. Unsecured loans might include car finance, student loans or tax bills. Lenders can allow remortgaging for all sorts of things.
Do many lenders offer remortgaging for debt consolidation?
Yes, almost all mortgage lenders will allow remortgaging for debt consolidation. They’ll all have their own criteria and some lenders will only allow debt consolidation up to a certain Loan to Value.
What are the pros and cons of remortgaging to consolidate debt?
The main pros are that it can reduce your overall monthly outgoings to a more manageable amount. On the negative side, you need to be aware that you would be turning unsecured debt into secured debt. Your mortgage is secured on your home.
It also means that you’ll be repaying that debt over 25 or 35 years, depending on what term you’re on. You’re likely to pay more over that time, because you’re spreading it out over a longer period.
Are there any alternatives to remortgaging for debt consolidation?
The main alternative for remortgaging for debt consolidation would possibly be a second charge. Sometimes when we’re looking into a client’s options it’s not a good idea to remortgage at that point. Maybe there could be a large early repayment charge, for example.
We can still look at a second charge mortgage. That would allow you to consolidate the debts onto the property but it would just be on a second charge rather than a remortgage.
How do I get a consolidation remortgage?
You would speak to a mortgage broker like myself. We’ll run through a fact find to understand your personal circumstances, what your income is and what the debts are. We’ll explore what interest rate you’re paying on these debts and how much the payments are. From there, we will make a recommendation based on how much you can consolidate and how much it will all cost.
If you’re happy to go ahead, we would arrange all the paperwork and arrange the debt consolidation remortgage for you. We’re here to run through everyone’s individual circumstances and give tailored advice to each person.
Think carefully before securing other debts against your home.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up with your mortgage repayments.