Request Callback

Remortgage for Debt Consolidation

  • Specialist remortgage advisors
  • Personal service
  • Free advice
Author: Carl Shave-Director
Updated on June 14th, 2022




Check your eligibility in minutes by completing our Mortgage Affordability calculator


Remortgage to Pay Off Debts, with our Help

Struggling to deal with debts, sometimes continually shifting loans from one facility to another while interest continues to add up, is a stressful reality sadly experienced by an ever-increasing number of people. Financial problems can hit you for a wide variety of reasons – ill health, loss of job or family issues, to name just a few – and satisfying all sources of finance can leave you feeling that you are caught in a situation spiralling out of control, that you will never be able to get out of it, and your life will be constantly filled with worry.

However, if you own your own home, there could be a way to better manage your debts and bring them under your control. By taking out a remortgage for debt consolidation (or a secured personal loan), you will be able to use the equity resting in the value of your home to pay off your various debts, and bring them together under one repayment plan with your mortgage provider, where the interest rate could be more favourable than with other lines of credit. Please note that it can go both ways – the total credit charges in the long term may be higher than your current short-term arrangements. Read on below to find out more.

Remortgage Rate for Debt Consolidation

For a lot of people, taking out a loan or using a credit card can be the easiest and quickest way to pay off debts, and in certain cases it can also be the correct thing to do – it’s all down to personal circumstances at the time. However, this kind of lending usually involves higher interest charges.

A remortgage deal or personal loan secured against your home usually carries the most favourable interest rate in the loan market, resulting in lower repayment amounts each month, thus making either of them a more cost-effective way of handling your debts.

Instead of paying off a number of outstanding debts to various lenders (often on high short-term interest rates), homeowners can consolidate some or all of their outstanding debts to, in some cases, drastically reduce their monthly outgoings and make their debts far more manageable.

More Information on Remortgaging for Debt Consolidation

How does a Remortgage work?

The aim with taking out a secured loan or remortgage to pay off debt is to obtain a significant single amount of money which you can use to settle all of the outstanding amounts you owe. This will result in you having just one loan to repay, or payments on a mortgage, to deal with, often at a better interest rate, which will not only be easier to organise, but a much better result for you financially.

Secured Loan or Remortgage?

Your decision on whether to go with a secured loan or remortgage to settle your debts will depend on your individual circumstances. No two people’s situations or back-stories that would influence their borrowing are the same, and it would be wrong to suggest that one solution would be the best for everyone.

This is why it is especially important for those who want to use equity tied to their homes to pay off existing debts to talk over their situation with an expert advisor, experienced in remortgaging for debt consolidation. At The Mortgage Centres, we have helped a great number of people in all kinds of financial situations to find a mortgage that best suits their needs, and would work with you to provide a solution to your personal situation.

Secured Loan for Debt Consolidation

A secured loan to consolidate your debts entails borrowing money secured against your home for the purpose of paying off what you owe to various lenders. Often referred to as a ‘second charge’ against your property, you must remember that if you, for whatever reason, fail to keep up with repayments, then not only will you damage your credit rating, making it more difficult for you to borrow money again in the future, but also your home could be potentially at risk.

However, as a provider’s assessment for a secured loan can be more favourable than that for a mortgage, a secured loan can be a useful option to consider if you have had problems with obtaining a new mortgage due to a poor credit rating.

It can also work very well for people who would face burdensome charges for early repayment of their existing mortgage, or those who simply want to retain their current mortgage arrangements. In these cases, a secured loan could be the best option.

Remortgage for Debt Consolidation

The best alternative to a secured loan is to take out a remortgage on your home. If you have sufficient equity in your property, then you can use the large lump sum this could generate to pay off your other existing debts.

The amount you will be able to borrow will depend on the current value of your home and the remaining balance on your mortgage. But you should also bear in mind that the maximum most mortgage lenders will allow you to borrow (at the time of writing) is 90% of the value of your property.

For example, if your property is worth £250,000, and you have £100,000 of your mortgage left to pay, then there is £150,000 of equity in your home. However, the most you will be able to borrow under a remortgage would be 90% of the property’s value, meaning the largest mortgage you could have would be £225,000, and the lump sum you might see from remortgaging to pay off your debts would be £125,000.

Also note, any mortgage offer will be subject to the lender’s assessment criteria, and they may only be prepared to offer a lower loan-to-value ratio for the loan.

Monthly Repayments

The peace of mind you would get from paying off all your debts and bringing what you owe under one single monthly repayment is eclipsed only by the substantial potential financial benefit you can gain from consolidating your debts in a remortgage deal. Interest rates for remortgages are usually much better than those for short-term loans.

Here is an illustration of how interest rates and payments can compare:

Multiple Lenders:

TypeBalanceTermRateMonthly Payment
Mortgage£120,00022 years4%£685
Loan£12,5006 years15%£265
Loan£3,0004 years17%£87
Credit Card£5,000NA22%£92
Total£140,500  £1,129


Single Mortgage Loan:

TypeBalanceTermRateMonthly Payment
Mortgage£140,50022 years4%£802
Total£140,500  Saving of £327 PER MONTH

As ever, you should always remember that everyone’s circumstances are different, and you should take a careful look at how this would work in your own situation before making a decision.

Remortgage Advice

After looking at all the facts and weighing up all the options and possible scenarios with a mortgage adviser, if you know that remortgaging for debt consolidation is the right course for you then the next stage is to work out which mortgage product will be the best one to suit your circumstances.

Considering all the products and offers on the market, you may find that you are best off financially by staying with your current mortgage provider, or you might see that switching to another lender will be most cost-effective in the long term. Remember, there will be fees and costs associated with remortgaging with another provider, so be sure to factor this into your calculations as well as any possible interest savings. It might be that the total you would pay in the long term would be higher than with your current short-term arrangements, so be careful to check everything.

At The Mortgage Centres, our team have huge experience and knowledge of the mortgages market, as well as access to deals not widely available to the public. We will be happy to walk you through the remortgaging process, making sure you understand all your options. To get more information on how we can help, or to book a free, no-obligation chat with an advisor, feel free to get in touch today.

Contact Us

Fill out your details and we will contact you

Click here
Proudly working with
… and many more!

Thanks for getting in touch, a member of the team will be in contact shortly.

TrustPilot Badge