Debt consolidation and mortgages

You can either increase your current mortgage or switch to a new one for a higher amount and use the extra money to pay off other debts.

This would mean you’d only have to make your monthly mortgage payment rather than shelling out various amounts to different creditors.

But remortgaging to pay off debt can be risky.

There are quite a few reasons you should exercise caution before remortgaging to pay off other debts.

Your home is at risk

Debts like credit cards and buy now, pay later aren’t tied to a specific asset, whereas your mortgage is secured against your home. Increasing your mortgage payments to pay off unsecured debt is a risky move because your home will be at stake if you miss a mortgage payment.

There may be hidden costs

You might also have to pay early repayment charges on the debts you’re paying off and a set-up fee for a new mortgage.

It could take longer to pay off and cost you more

Mortgages tend to be long-term commitments. So, by effectively adding your other debts to your mortgage, it could take you much longer to repay that debt (depending on the remaining term). 

And if you end up spreading your debts over a longer period, chances are you’ll end up paying more in interest even if the rate is lower.

Not everyone will be able to remortgage

If you’re looking consolidate your debts by remortgaging because you’re currently struggling to keep on top of your other debt repayments, lenders may be reluctant to offer you further credit.

How much extra you’ll be allowed to borrow, if anything, will be down to the individual mortgage provider.

They’ll consider: 

• if you can afford higher mortgage payments
• your credit history
• how much equity* you have in your home

* This is the difference between your home’s value and how much you still owe on your mortgage. 

You’ll have less equity in your home

Remortgaging to consolidate debt reduces the equity you have in your home.

This means you own less of your home, something that could go against you if you want to release equity, move house or remortgage down the line.

• Will this improve my situation in the long run?
• What will my new monthly mortgage payment be?
• How much more interest will I pay?
• Are there any fees?
• Am I confident I can keep up with payments?
• Could my credit score count against me?
• Are there better or safer options for managing my debts?

If you’re considering remortgaging because you’re struggling to manage other debts, get professional advice first.

We’ll look into whether other options for managing your debt may be more suitable.

We can also help with budgeting and making sure you’re claiming all the financial support you’re entitled to.