Debt Consolidation Remortgage

What is Debt Consolidation Remortgage?

Put very simply, it’s a way of adding unsecured borrowing like credit cards or loans to your current mortgage. You could potentially remortgage with a new lender or take a new product with your existing lender.

Is consolidating a good idea?

That’s purely down to the individual circumstances. It can be a good idea for some people but there are certain pros and cons around adding unsecured debt to a secured debt. 

It’s our job to make sure it’s the best thing for each individual. We’ll look at the details to advise whether it’s worthwhile extending your mortgage to clear off the debt. It can be beneficial financially – but is it fully the right thing for the client?

What’s the process and what documents do I need for a debt consolidation remortgage?

The main thing that you will need is the detail of the debt that you’re looking to secure and your existing borrowing in general. You may not be looking to secure all of it, for example. 

With loans and car finance, the actual balance of the loan or finance may not actually be the ‘settlement figure’ – because sometimes lenders will add additional interest. Alternatively you might get an interest rebate – but it is very important to have accurate figures in terms of what you’re looking to consolidate. 

Other things that are important are things like interest rates on the unsecured borrowing. For example, it may not make financial sense for you to consolidate £500 that’s on a 0% credit card – because you’re then going to be paying interest over a much longer period of time. So your documentation is obviously key. 

What’s the difference between debt relief and debt consolidation?

Debt consolidation is what we’re talking about here – taking unsecured debt and securing it –  whereas Debt Relief is where you contact your provider or go through to court to put a plan in place to help you repay your debts. 

Can you remortgage with credit card debt?

You can, yes. Clearly if your spending is on a 0% credit card it’s not sensible to consolidate that. First and foremost, you’re adding it to the mortgage and therefore securing it on your home. 

And secondly if it’s on 0% interest, so why start paying interest on that debt? So again, whether remortgaging is a good idea is really down to your circumstances.
Can you consolidate more than once?

Yes, you can but you will probably find the second time round that lenders will be more cautious. You took additional borrowing the first time to pay off unsecured debts – and here you are again, in the same situation. So it will be potentially more difficult the second time round.

Is there any other debt that mortgage lenders consider?

They will take the majority of unsecured debts – whether it’s personal loans, credit cards or store cards. I’ve done consolidation remortgages where a client was paying back family members, and another to pay a solicitor. 

Generally it can be used to repay any plan or regular financial commitment that is in place. Each individual lender will have their own interpretation of what’s acceptable, and as always, we need to understand the individual’s personal circumstances.

What are the main things to consider with a debt consolidation remortgage?

It’s different for everyone. We might speak to two people on the same day who both have £20,000 on unsecured credit cards and loans for example. We know full well that one of them has racked up that debt for a life event or a certain situation – such as separating from a partner or investing in home improvements. Meanwhile the next person has just been, shall we say, a bit foolish and spent more than they should have.

So what we do is go through your circumstances. It might be the case that with increasing debt, there’s an increasing chance that you fall into arrears and end up with bad credit issues. 

There are a lot of things that could affect the outcome, so if this is something you’re considering, speak to us as early as possible so we can guide you. By having a good understanding we can inform the lender and make sure this is the right thing for you to do.

Think carefully before securing other debts against your home. 

Consolidating debt may reduce your outgoings now, however you may pay more interest over your mortgage term.

 Your home may be repossessed if you do not keep up repayments on your mortgage