If you have multiple debts which consist of several payments to personal loan providers and credit card companies then this may be the ideal option for you. Consolidating your debt onto your mortgage will help you budget and manage your debts, this will be one monthly payment rather than multiple payments going to different places on different dates, and this will help you organise your finances.

When you remortgaging for debt consolidation you are typically offered a lower interest rate compared to interest rates on personal loans and credit cards. Your monthly payment will increase if you remortgage to pay off debts as you will be releasing equity from your home to do so.

Here are some of the pros and cons of consolidating debt onto your mortgage:

Pros

1. Fewer monthly payments - one monthly payment will leave your bank account on the same date every month rather than multiple payments on different dates
2. End date - loans and especially mortgages have end dates, this will help you organise your finances as you know when they will be paid off. If you are paying the minimum payment amount on a monthly basis, especially on credit card debt then this will take you longer to pay them off as interest will build up on them
3. Lower interest rate - more desirable rates will be offered to you for mortgages compared to that of loans and credit cards
4. More disposable income - Generally when you debt consolidate you lower your monthly outgoings and save money. This will then give you more disposable income.

Cons

1. Term of the debt - mortgages are typically taken out for a longer period than a loan which means you will be paying off the debts for a longer duration. This means over the term you may pay more over a longer period.
2. Available mortgage deals - if you have missed payments and a lot of debt then there may not be many options available to you as this may have impacted your credit profile and you may be deemed as a high risk to lenders
3. Your home - as your home will be used as collateral there is always the risk of losing your property if your finances spiral, bankruptcy may be your only option but you will also lose your home by doing this as this is a secured loan against the property

Debt Consolidation Mortgage

If you believe remortgaging to consolidate debt is the right choice for you, it's essential that all potential options are carefully considered and a mortgage broker can help you with this, there are also companies who can offer free debt advice. Debt consolidation can be a hard decision, particularly if debts will be secured against your property - this could mean higher monthly repayments as you will be increasing your mortgage loan amount and potentially changing your loan to value (LTV).

You will need to borrow money from the mortgage lender through a new mortgage deal to consolidate debt. The additional amount you can borrow depends on how much equity is held in the property, as you will need to release equity to consolidate debts.

Monthly Payment

Your existing mortgage payment may be cheaper than the monthly repayment on your new deal. However, you will only have one monthly repayment going out and the other debts you chose to consolidate will be gone, therefore no further payments will be required for these.

This means that your monthly outgoings will be more organised, and this will help prevent any further financial problems. If you have other debts, they will run alongside this as normal if they aren't consolidated with a mortgage provider.

Credit Profile

A poor credit rating can decrease your chances of having various remortgage deals available to you, this is due to the bad credit you may have on your credit file. This may mean you end up paying more interest as the rates available to you may potentially be higher than other deals, there may also be less interest rates for you to apply for. A mortgage adviser will be able to help you with this especially if you are looking to turn your bad credit into good.

If you are looking to remortgage to consolidate your debts you will need to seek professional advice as consolidating your debts all comes down to your own personal circumstances. This isn't something to be taken lightly due to the high level of risk to your property, think carefully before securing these debts to your home.

If you are looking to discuss your financial situation when it comes to debt consolidation mortgages, call us today on 01516620188 or email [email protected] for more information.