Remortgaging for Debt Consolidation

Remortgaging for Debt Collection – A guide to what you need to know 

Having debt looming over you can be incredibly difficult to deal with. Therefore, you may want to explore the options that are available to you in order to consolidate the debt you have built up and remortgaging for debt consolidation is one of the ways you can approach the debt clearing process. 

Can you remortgage to help with credit card debt? 

Opting to remortgage to ease credit card debt is an option. You can remortgage to release some of the equity in your home, which can be used to clear debt that has accrued on your credit cards.

Will consolidating your debt hurt your credit rating? 

Most people think consolidating your debt won’t have an impact on your credit rating, however, it does temporarily affect your credit rating. Anytime you apply for a form of credit, your credit score will reduce, so when you initially consolidate your debt your rating will slightly dip. 

However, once you have received the cash lump sum and have cleared the debt, your credit score will improve over time due to an absence of outstanding debts. 

Remortgaging for debt consolidation: how does this affect my mortgage rate? 

Whether remortgaging for debt consolidation impacts your mortgage rate will depend on your personal circumstances. 

If you have poor credit and you want to apply for a mortgage to consolidate your debt, you could end up getting a higher interest rate due to your outstanding credit issues. 

However, if you don’t have a poor credit history initially, the mortgage rate you receive will usually be inline with that of a ‘standard’ mortgage. 

When is the best time to remortgage to consolidate your debts? 

Remortgaging to consolidate debt usually means you have explored most other avenues, as it’s never recommended to take unsecured debt against the security of your home. 

We tend to only advise people to remortgage for debt consolidation once all other options have been exhausted, so it’s best to approach the remortgaging option as a last resort. 

However, if you’re borrowing to pay off short term debt, we would advise against remortgaging for debt consolidation all together as when you’re remortgaging, you’re going to be paying back high interest due to it’s longer term nature. 

Secured loan vs remortgaging 

If you are looking to consolidate debt, it’s a good idea to weigh up both a secured loan and remortgaging as a resolution. 

With a secured loan, you take out a loan against your home – it’s easier to be arranged if you have poor credit in the background and they also allow you to borrow more money. 

If you have a strong credit rating and are in a good financial position, remortgaging may be a better option as the interest rate you pay will be competitive and in line with ‘standard’ mortgage rates. 

Is there a limit to the number of times you can remortgage to consolidate debt? 

There are no set in stone rules to determine the number of times you can remortgage for debt consolidation, however, the more times you do remortgage, the more it’s going to reflect badly on your credit score and lenders will begin to ask questions around the way you manage your finances.

Remortgaging can be a great way to consolidate debt as it frees up your disposable income so you can still focus on other financial commitments you may have, however, it shouldn’t be seen as a regular way to relieve debt troubles. 

When is the best time in your mortgage journey to remortgage for debt consolidation?  

It’s important to note that you need to actually own your property and have equity tied up in it that you can release. With adequate ownership and equity at any point in your mortgage process, you can look to remortgage for debt consolidation.

Get in touch

If you are looking to secure a remortgage to consolidate debt at any point in your mortgage journey, your chances are increased automatically by going through the process with a mortgage broker at your side due to the number of lenders they can explore.

We offer free initial consultations to give you an idea of your options and discuss whether remortgaging for debt consolidation is the right avenue for you to personally go down. If you decide to go ahead with us, we will then guide you through the remortgaging process and get you on your way to consolidating your debts and living a life free from any debt worries.