Debt Consolidation Remortgages

Debt consolidation remortgaging is a way to replace your current mortgage provider and product with new terms – often changing the amount you pay each month. By remortgaging your home, you can free up a lump sum, which can then be used to clear other debts such as credit card repayments, unsecured loans or different types of finance. However, it should be stressed that this is not suitable for everyone. We have to do a lot of calculations to ensure it's beneficial and you understand the implications of adding any debt to your mortgage as you may be securing previously unsecured debt against your home, reducing your equity.

Suppose you wanted to remortgage your home and free up a lump sum of £5,000 to pay off a credit card debt in full. You could save months of potential interest and credit card repayments in that case. But, of course, it might be the case that your monthly mortgage payment rises slightly, and you may end up paying more interest in total as the debt will then be over for a much longer time.

On other occasions, a debt consolidation remortgage can be used to reduce your overall monthly commitments. This might be a way of lowering your financial outgoings, but it almost certainly means increasing the length of the term of the debts; for example, let's say you have a loan that you pay monthly for five years; after five years, the loan is paid off. However, you could consolidate that into the mortgage, but that loan amount is now being paid over a much longer time frame. This can increase the overall cost of the interest you pay, so you must be aware that you would be securing previously unsecured debts against your property. This, in turn, means that you are reducing the equity you have in your home or property.

You'll almost certainly change your mortgage lender, often to a better deal; you might only have one monthly payment if you consolidate everything together; it may give you peace of mind that you know precisely how much you're paying out per month & you might be able to free up some disposable cash month to month. 

There is always a downside to everything, though. This is why you need to take advice; to make sure it's suitable for you and your circumstances:

• Your monthly mortgage payment could rise if you borrow more money
• If you stretch a five-year loan over 25 years, you'll pay more in total interest.
• You might have to pay fees to switch your mortgage or even fees to set up a new mortgage, so all these have to be considered. 

The answer is maybe. It'll depend on several factors, including but not limited to; the amount and frequency of your income, your employment record, the current value of your home and how much equity you have, the size and type of debts you want to consolidate into your home, the length of time you have left on your current mortgage and your credit history. As with anything mortgage-related, there are certain things we can't do, and it's the same with a debt consolidation remortgage. There are certain debts that we can't consolidate as it just wouldn't make sense to do so, and these are:-

• Any debt with a balance of less than £1000 at the time of advice.
• Any debt with less than nine months left to run at the time of the recommendation.
• Any debt that is on 0% interest at the time of advice.

Of course, we have to take into account why you want to consolidate debt - after all, lenders will want to know the following things;

• How have the debts arisen?
• Why does the client want to consolidate their debts?
• What are they looking to achieve by consolidating debts?
• How are they in the position to need to consolidate debts?

• What can I borrow?
  Loan sizes range from £5000 to £15,000,000, subject to status.
• How long are the repayment terms?
  A mortgage can be over 5 to 40 years, but not all lenders offer those terms.
• What are the interest rates?
  This will depend on several factors and can change daily – and you might not be eligible depending upon your circumstances as mortgage lending is subject to status.
• How much are the fees?
  This depends very much on each lender and mortgage product, all of which will be illustrated to you in a personalised mortgage illustration.

As you can see, there's a lot of information to consider with this type of remortgage, and it isn't suitable for everyone. It's best to talk to an independent mortgage broker with experience in doing debt consolidation remortgages to make sure that it's right for you and your circumstances and clarify all the costs and fees mentioned above.

If you want a no-obligation consultation, contact us below to schedule an appointment - the first appointment is always at our expense. We are independent mortgage brokers covering Mansfield & Sutton-in-Ashfield. So if you need a mortgage broker in Mansfield or a mortgage broker in Sutton-in-Ashfield, we're here to help.