Remortgage for Debt Consolidation

  • Expert mortgage & protection advice
  • Thousands of mortgage products available
  • See if we can help you find the right deal 

Get in Touch

1 Step 1
FormCraft - WordPress form builder

Remortgaging for Debt Consolidation – What you need to know

Thinking of remortgaging your home? There are plenty of reasons why you should do this, but there are just as many for why you shouldn’t. Whichever is right for you, will depend on your circumstances. There is no one-size-fits-all approach.

It is possible to raise funds to consolidate debts by remortgaging your property. This essentially releases some of the money you have paid towards owning your home to free up finance to pay for other debts. This can in turn make your debts more manageable, but it’s worth bearing in mind your monthly repayments on your mortgage could increase.

Working out what you can afford and the new mortgage terms are important considerations before you apply. Speaking with an expert mortgage advisor can assist you through this process, saving you time and effort. They can scan the market to ensure you are getting the best deal available to you with a view to easing the pressure.

Remortgage overview

Basically, when you remortgage you switch from your current or old mortgage to a new deal. This can be through an existing lender or perhaps you can move on and find a completely new provider.

Who is able to remortgage?

Anyone can potentially remortgage their home, as long as they own the property and they have the financial record that lenders trust to do business with. Although homeowners are able to remortgage at any time, it is important to bear in mind the terms of your mortgage and any fees/penalties associated with remortgaging outside of an expiration clause. It is best practice to speak to us your mortgage brokers around 4-6 months ahead of a rate expiring.

In what circumstances do you remortgage?

Many people choose to remortgage their home because their circumstances have changed, they need extra money, whether it’s for a holiday, constructing an extension, or perhaps for a private matter.

A remortgage can be a loan that swallows up your existing mortgage and offers you a better but more long-term plan. This is useful if you have come across financial hard times and you’re unable to meet the obligations you signed up to in the original mortgage deal.

It can also be useful if you would like to refinance your home, build a new kitchen, or extend the property. If you would like to build an extra bedroom in the loft, this is a good source of money. Since you’re improving the property and adding value to it, lenders are more likely to offer you a higher amount and potentially better percentage rates.

Debt consolidation

The other very useful reason why you would want to remortgage your home is because of your desire to consolidate all your debts. Remortgaging for Debt Consolidation is common and since your repayment plan is essentially backed by property, 80% of lenders are more likely to accept this route.

How does it work?

Remortgaging for Debt Consolidation can be approached in a different manner. You need to establish how much all of your debts cost. Once you have calculated your outstanding debts you will have a figure that you can work with and speak to lenders about.

The next stage is to figure out your loan-to-value. Will your property price suffice for the debt? To do this you must add the amount of existing mortgage that is on your property to the amount you wish to borrow.

Divide your home’s price with the total new loan and then multiply that by 100 and you’ll know the overall percentage of the property value you intend to borrow. For example, £150,000 (total loan) divided by £250,000 (value) x 100 = 60%

Remortgaging for Debt Consolidation is one way to get yourself out of the debt avalanche. However, there are some things to consider before you get approved. Your credit score, how much equity is in your home/bank and the current house value are some examples. Also it is worth remembering that debt consolidation is secured against your home and is likely to cost more in the long run due to being added to the mortgage.

Working with a specialist mortgage broker can help you to understand what information a lender will be looking for and run through all these calculations with you. This will not only save you time and effort, but it can also avoid unnecessary hard checks on your credit history before having your application ready to send to a lender.