How to consolidate your debt
This can make sense, as the interest rates charged on mortgages tend to be lower than those for other types of debt, such as credit cards and personal loans.
Remortgaging will allow you to consolidate all of your debts into one loan that is easier and cheaper to manage. However, there are some disadvantages, for instance, you will need to have considerable equity in your home (that is, your mortgage needs to be significantly less than the current value of your property). Once you have consolidated all of your debt into your mortgage, some of this equity will disappear.
Adding extra debt onto your mortgage will also obviously increase the total homeloan amount. Therefore, you will either have to increase your monthly repayments or lengthen the term of the loan to accommodate this.
Calculate your remortgage fees
It is essential that you do your sums before you remortgage – there’s no point in going through the process only to find that you’re financially worse off afterwards.
Firstly, make sure the interest rate you are offered on your new mortgage is competitive. You may also have to pay for a valuation and legal fees, admin costs and other arrangement fees, plus an exit fee for paying off your current mortgage – it’s important to work out all these costs and factor them into your calculations before making a final decision.
In the long run, remortgaging could work out to be a cost-effective way to consolidate your debts. But you must get the maths right. And you will probably only be allowed to do it if you have substantial equity in your property.
A financial adviser could help you to work out the figures if you feel you need help making the decision.
Get the ball rolling by making the most of our free range of mortgage calculators.