We speak to a lot of people who are considering remortgaging for debt consolidation. This is an option that you need to consider carefully before securing a new mortgage deal for the purposes of debt consolidation. When your monthly outgoings are starting to increase and you want to put them all in one payment, it is tempting to look at remortgaging. We will look at some of the things you need to be aware of when considering this.
It may be that you have several monthly repayments you currently make to different creditors. This could be from credit card debt, personal loans, store cards, or other credit agreements or a combination of several, or all of these. Most of these are likely to be unsecured debt, one that might not be would be car finance because most credit agreements for car finance are secured against the vehicle. If you don’t keep up with the payments or cannot afford to pay the finance anymore then they can take the car back. When you remortgage to consolidate these debts, along with your existing mortgage, into one monthly payment, with a single interest rate, it becomes a secured loan. This is because you are securing the debts against your home. If you do not keep up with the repayments on your mortgage your home could be repossessed.
There are benefits to remortgaging to collate debts into a single payment. We mentioned that you will have a single interest rate. With multiple debts, they have different interest rates. If you remortgage and take out a fixed term mortgage you will know what the mortgage rate is and the single monthly amount, you’ll need to pay. You only have one payment and one mortgage lender to deal with, rather than multiple companies. Remortgaging is certainly a route for consolidating debt that has helped plenty of people and having one payment is usually lower than having multiple monthly amounts leaving your account.
Remortgaging for debt consolidation often makes it easier to budget. You have one payment to worry about and this is a high priority payment making you far more likely to ensure you budget for it. Typically, the rates you get are better than a loan rate or the rates on credit cards. This option means that you can usually borrow a higher amount, in comparison to personal loans, and you can release higher equity percentage in your property.
As we mentioned earlier, you need to seriously consider remortgaging for consolidating debt. We recommend that you speak to an appointed representative at identityfs. As a mortgage broker, registered in England and authorised and regulated by the Financial Conduct Authority, you are in safe hands. Our team of experts have the knowledge to offer mortgage advice to see if this is a route you should consider. We have a network of lenders and can give you options for remortgaging.