20 Jun 2023
Debt Consolidation into a Mortgage
We are often asked if it’s good advice to consolidate “unsecured” debt (credit cards and loans etc) into your mortgage, the answer is, sometimes.
As long as you have sufficient equity built up in your property, you can borrow additional funds to pay off any of the following:
- Loans
- Credit cards
- Hire purchase agreements
- Overdrafts
- Student finance
This would typically be by either re-mortgaging to a new lender and increasing your loan amount or taking a further advance from your existing lender. If neither of these are possible you may be able to arrange a second charge loan from another lender
It is true that paying off credit and adding it to your mortgage will reduce your monthly income initially. However, before you go ahead it is very important to go through each item of credit with your Mortgage Adviser and ask them to calculate how much it will cost you overall if you consolidate it into the mortgage vs how much it will cost if you leave it as an unsecured debt. This will help you to decide what to consolidate and what to leave as it is.
As a rule of thumb, any credit with a balance under £1,000 or where there are less than 12 months remaining on the term should not be considered, as this is not good advice!
The main benefit of taking this course of action is clearly that it will reduce your monthly outgoings. As well as this, the interest rates on secured borrowing are typically much lower than on unsecured borrowing and you will only have one payment to manage.
On the downside, additional secured borrowing puts your home at greater risk if you become unable to make the repayments and you will likely be making repayments for longer as you are spreading the costs over a longer-term
I want to re-mortgage, what do I do next?
If you feel that debt consolidation into a mortgage is for you, you’ll want to compare a range of lenders. The best way to find the most suitable deal for your personal circumstances is to seek help from a mortgage broker. This is where Mortgage Required can step in and guide you through the process. Give us a call on 01628 507 477 or email team@mortgagerequired.com
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