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Remortgages for Debt Consolidation

Is there a limit on the amount you can borrow through a remortgage to consolidate debts, and when is a debt consolidation mortgaging the right solution?

Remortgages for Debt Consolidation

Debt consolidation is one of the most common reasons to look at remortgaging, and can be a cost-effective way of managing your liabilities over a more extended period.

The Revolution team has created this guide to explain the pros and cons, and how alternative lending might help ease the pressure of managing multiple debts.

To enquire or learn more about remortgages for debt consolidation, give us a call on 0330 304 3040 or drop us a message to [email protected].

What Are Debt Consolidation Remortgages?

When you remortgage, you take out a new loan to pay off the old one. If you have equity in your home, you can increase the amount you borrow to pay for other costs.

By releasing equity, you raise capital to repay your debts and pay back the increased value through your new mortgage repayments.

Debt consolidation remortgages can help reduce your monthly outgoings, collate multiple debts into one, and make the repayment process easier over a longer period.

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Based On Your Yearly Income, You May Be Able To Borrow

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

How Does a Debt Consolidation Remortgage Work?

Lenders will look at several criteria:

You will often be asked to sign a contract via a solicitor confirming that the remortgage proceeds will be used to repay the debts in full.

In some cases, you might have an excellent interest rate in your mortgage and are reluctant to remortgage and lose those cheaper rates. If that applies, you can consider alternatives such as a second charge loan.

What are the Benefits to Consolidating Debts into a Remortgage?

There are lots of reasons people choose a debt consolidation remortgage:

Debt consolidation remortgages can be used to repay any type of lending, including:

  • Bank overdrafts
  • Credit cards
  • Payday loans
  • Unsecured loans

As an example:

  • You owe £5,000 on a credit card, at a 24.5% interest rate.
  • You also have a £7,500 loan charged at 16.95% SPR.
  • In total, your short-term debt is £22,500.

Over ten years, you will pay £23,423 of interest, with the total repayment on your £22,500 lending being £45,923.

If you opted for a debt consolidation remortgage at a 5% interest rate, the total repayment, including interest, would be just £28,638.

Is it Best for Me to Roll Up my Debts into a Mortgage?

Whether remortgaging for debt consolidation is right for you depends on your circumstances.

For a lot of people, this is a sensible option. However, if you have an older mortgage with an interest rate that nobody would offer in today's market, it might not be the right solution.

Likewise, by stretching out the repayments over a longer-term, you could end up paying back more overall.

It's also worth remembering that if your short-term debt rises again, you will need to pay back the debt consolidation remortgage as well as any other obligations.

That said, remortgages to consolidate debts are a lucrative option for a lot of people, with one monthly repayment, and a more affordable cost. You can also avoid letting short-term debt get out of control, resulting in CCJs or bankruptcy, which is much more severe.

Contact the mortgage brokers team today to discover:

  • The best interest rates available.
  • Options for remortgaging terms.
  • How much you could repay per month.
  • Whether you will make an overall saving.
  • What other options are available.
  • How much the fees will be.
  • Whether you should choose fixed or variable rates.
  • How debt consolidation will impact your current situation.

How Much Can I Borrow on a Debt Consolidation Remortgage?

The value you can borrow depends on:

  • How much equity you own.
  • Your credit history.
  • The total debt vs income ratio.

If you have a bad credit history, you can also consider a bad credit remortgage, available through specialist lenders.

Some mortgage providers will lend up to 90% of the value of your property (LTV), and often this applies to properties worth over £500,000. Others will set a limit as to how much you can borrow for debt consolidation, usually £30,000 - £50,000.

Different lenders will be less concerned about setting limits, and more about how the debt arose, and how likely it is that you have now resolved the situation.

What is the Difference Between a Debt Consolidation Remortgage and a Second Mortgage?

A second charge mortgage is a separate product and is repaid separately from your original mortgage. It is still secured against your home but doesn't impact the existing mortgage.

This option is usually chosen because you don't wish to lose your first mortgage, typically because the interest rates are very competitive.

Can I Remortgage to Consolidate Debt Past Retirement?

You can indeed - some lenders set caps on lending ages, or might restrict the value they can lend to retirees, usually around £10,000.

However, while some providers set an age limit of 75 or 85, others have no restrictions at all.

Which UK Lenders Provide Debt Consolidation Remortgages?

Many high-street banks offer debt consolidation remortgages - although the criteria and rates available vary significantly. These include:

  • Accord Mortgages 
  • Barclays 
  • Bluestone
  • Halifax 
  • HSBC 
  • Nationwide
  • NatWest
  • RBS
  • Virgin Money

You can often find more competitive rates from niche lenders, particularly if you have unusual circumstances such as bad credit history.

Professional Advice with Debt Consolidation Remortgaging

If you are considering a remortgage to consolidate debts, contact the Revolution team today. We have whole-of-market access, so we can offer you the best products and negotiate the most competitive rates on your behalf.

Contact us on 0330 304 3040 or email the team at [email protected].

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