Remortgage To Consolidate Debt
Best Mortgage Rates
Remortgage To Consolidate Debt
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- Lloyds Bank
- 3.98% Initial
- 5 year fixed
- 6.4% APRC
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Cashback Max £250Free LegalsFree Valuation
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- 4.04% Initial
- 5 year fixed
- 6.1% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.05% Initial
- 5 year fixed
- 5.8% APRC
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Cashback Max £1,250Free LegalsFree Valuation
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- 4.05% Initial
- 5 year fixed
- 5.8% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.10% Initial
- 5 year fixed
- 6.2% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.10% Initial
- 5 year fixed
- 5.8% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.12% Initial
- 5 year fixed
- 6.2% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.12% Initial
- 5 year fixed
- 5.6% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.12% Initial
- 5 year fixed
- 6.2% APRC
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Cashback £0Free LegalsFree Valuation
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- 4.13% Initial
- 5 year fixed
- 5.6% APRC
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Cashback £0Free LegalsFree Valuation
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1. Introduction
The average household debt in the UK was £65,529 in 2024 (Source: The Money Charity) with unsecured debt representing £7,619 of that amount. 24.6% of British consumers have used a credit card to cover costs of living. In 2022 3% of UK adults had unsecured borrowing over £10,000.
With this backdrop, UK homeowners with mortgages using unsecured debt to help cover living costs should consider whether they can remortgage to consolidate debt. Why? Unsecured debts which start to mount incur considerable monthly interest rate costs e.g. the average credit card APR in the UK is 24.65% (Bank of England).
Remortgaging can be one of the most cost-effective ways to consolidate debt. This is the case for people with good or less-than-perfect credit records.
Why is this? Typically secured debt ( a mortgage secured on your home) is cheaper than unsecured debt. At the time of writing a market leading mortgage rate over 5 years is available for a homeowner with good credit under 4%. If you have unsecured debts over £10,000, including credit card debt, then consolidating these debts could reduce the burden on your monthly budget considerably.
Mortgages.Direct provides a mortgage comparison service to compare current remortgage deals if you want to consolidate debts. Use our remortgage calculator to see what your monthly repayments could be. Getting good advice on your options is advisable and you can connect to a qualified adviser through our service.
2. What Does it Mean to Remortgage to Consolidate Debt?
So what is a remortgage? A remortgage is when you apply for a new mortgage with a lender different from the one you are currently with but remain in your current home. You typically look at remortgaging when you come to the end of your current mortgage deal. Your current lender may offer you a deal to stay with them, but it is good practice to shop around to see if you can find a better deal elsewhere.
Our mortgage service allows you to compare what you would pay with your current lender versus what is on offer from the rest of the UK mortgage market. When you come to remortgage if your house has gone up in value, it may mean that you qualify for lower rates because the loan to the value of your property has improved. So when you remortgage, you can add your unsecured debt to your current mortgage balance, meaning you will benefit from paying off that debt at a lower interest rate. It is important to note that your mortgage will likely be over a longer repayment term, so you will effectively be paying for this debt over a longer term.
If you are not sure what your current mortgage balance is contact your mortgage provider or you can check on a service such as Checkmyfile to see your latest balance as well as your current credit score.
Types of unsecured debt that can be consolidated in a remortgage include personal loans, credit card balances, store card balances, car loan finance, medical debts, mobile phone debts, utility bill debts, and tax debts.
3. Benefits of Debt Consolidation Through Remortgaging
By consolidating debt through remortgaging, you can lower monthly payments, taking the strain off your monthly budgeting. Rather than lots of unsecured loans & credit card payments to make, you can simplify your finances through one single repayment.
As discussed, remortgaging typically opens the door to much lower interest rates than unsecured interest rates, which typically are double digits.
If you don't pay off your credit card balance every month, the interest rate will typically be north of 18% APR. So, what's not to like about improving your cash flow and reducing interest rate costs?
4. Risks and Considerations
Longer repayment terms could mean paying more interest over time, e.g. if you have a personal loan debt with a 5-year repayment term and move the balance to pay onto your mortgage with a 20-year term, then you will be paying this debt off over an additional 15 years. So whilst you reduce monthly repayments, it will take longer to clear the debt.
Securing unsecured debt against your home increases the risk of repossession. So, in the worst case scenario, you add the debt to your mortgage, and you then cannot meet monthly mortgage repayments; the mortgage lender is within their rights to repossess your home to recover their debt.
Early repayment charges from your current mortgage lender can come into play if you remortgage before your current mortgage deal has expired. So typically, with a mortgage, there will be early repayment charges, e.g. with a 5-year fixed rate term, a lender may apply a 3% early repayment charge in the first 3 years, tapering down to 1% in the final year of the deal. So if you are contemplating a remortgage to consolidate debts before your current mortgage deal is over it is important to assess the ERC cost as part of the pros and cons of consolidating debt onto your mortgage.
We emphasise the importance of professional mortgage advice to ensure you make the right financial decisions.
5. Is Remortgaging to Consolidate Debt Right for You?
What are the Key questions to ask yourself?
Why might remortgaging be beneficial for you?
You should consider alternatives to remortgaging, balance transfer credit cards, personal loans, and debt management plans.
6. How to Remortgage to Consolidate Debt
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Step-by-step process:
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Review your current debts and mortgage terms.
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Calculate potential savings using a remortgage calculator.
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Compare mortgage deals using Mortgages.Direct.
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Seek mortgage advice to understand your options.
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Apply for your chosen remortgage deal.
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7. Why Use Mortgages.Direct?
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Access to a wide range of lenders and deals.
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Easy-to-use comparison tool tailored to individual circumstances.
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Expert guidance to find competitive rates.
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Save time and potentially money with informed decisions.
8. Frequently Asked Questions (FAQs)
Can I remortgage if I have bad credit?
It will depend on how much bad credit you have and when it was incurred and the reasons. Lenders will look at your credit profile when assessing whether they will lend to you. Whilst credit score is a factor, some lenders will look at the story behind why your credit score is low, e.g. illness that resulted in an inability to work
How much can I borrow to consolidate debts?
Again, it will depend on many factors, including, as a homeowner, the current borrowing relative to the equity in your property. Your current credit rating e.g. if you have recent missed mortgage repayments, remortgaging may not be an option.
How long does the remortgaging process take?
Typically, it will take 4 to 8 weeks, depending on the lender. A good mortgage broker can give you a good insight on current turnaround times as lender service levels can vary depending on market activity.
Will remortgaging affect my credit score?
A credit check will be done as part of a lender's due diligence in assessing your mortgage application, which will be marked on your credit file.
9. Get Started Today
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If you are thinking of remortgaging to consolidate debt as a first step, you can see what level of cost, based on current mortgage rates, you could expect to pay if you switch lenders. By taking your current mortgage balance and adding your unsecured debt balance, you can determine your revised loan to value (LTV) - use our remortgage calculator to see potential savings.
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Unsecured debts, if not kept in check, especially when you are struggling to make repayments on time, need action - delays can have a profound impact on your credit standing, so acting sooner rather than later is beneficial.
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"Compare deals now and take control of your finances with Mortgages.Direct."