Using a mortgage to repay debts
You can remortgage your home to repay unsecured or secured debts. By doing this, you are effectively increasing your mortgage and taking a lump sum from your home’s equity to clear debts, so it’s a decision that requires a lot of thought.
Your overall monthly payments may go down but it’s likely that the overall cost will go up in the long term as it’ll take you longer to pay off the debt and you’ll incur more interest.
Despite this, it could still be the right decision for you as it may afford you more stability and lower your month-to-month finances into one single monthly payment.
Will the debt impact my ability to remortgage?
Mortgage lenders have different criteria when consolidating debts but all will have capital raising limits against the house value; in the region of 80-85% with 90% generally being the absolute maximum. Mortgage lenders will also consider the level of debt you have against current annual income i.e. £10,000 of debt against £50,000 joint household income would be a 20% debt-to-income ratio. Even if this is being cleared some lenders will consider these as unpaid debts for affordability as a responsible borrowing measure if these debts were reaccumulated. However, if your debt is well managed this will not prevent you from raising capital to clear these debts subject to the above considerations. If you have had challenges managing payments, resulting in missed payments, defaults or CCJs, please refer to our Adverse Credit Guide.
Debt Consolidation Mortgage Advisers
Speaking to a Specialist Home Group Advisor will give you the best chance to get your debt consolidation mortgage application accepted, because we know which lenders to approach, saving you time and money.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.