Paying Off Debt By Remortgaging

Important to know

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. You may have to pay an early repayment charge to your existing lender when you remortgage. Think carefully before securing other debts against your home.

You may be able to lower your monthly debt payments by consolidating other more expensive debt onto your mortgage.  

Remortgaging your property is often a more cost-effective solution than other types of debt relief, but only if you find the right type of agreement with the best lender. Interest rates are not the only thing to compare when choosing which institution to approach for this type of service. 

By remortgaging and consolidating your other debt, you could lower your monthly payments, as opposed to taking out a new credit card or personal loan. However, you will be likely to pay more interests overall, as a mortgage typically has a longer term than the other shorter term debt. It is always a good idea to speak with a mortgage broker to help you calculate the numbers for you and discuss options.  

Remortgaging can be a beneficial way to pay off debt, allowing you the opportunity to make more affordable payments and potentially save money in the long run.  

Please remember that a mortgage is a loan secured against your home. Your home may be repossessed if you do not maintain repayments on your mortgage or any other loan secured against it. You may have to pay an early repayment charge to your existing lender when you remortgage. Think carefully before securing other debts against your home. 

Chat with a remortgage broker to figure out your loan options and how much it could cost you. 

What is a remortgage? 

Essentially, when you remortgage to clear debt, you’re just changing your current mortgage agreement for a new one. If it’ll help you get cheaper deals or more flexible agreements, you might also decide to switch lenders in addition to changing mortgage products.  

If you’re not happy with your current mortgage rate, it’s always worth considering a remortgage with your lender. Depending on market conditions and the equity in your home, you might be able to secure a much lower interest rate. And if you release some of the equity in your home through remortgaging, you can use those funds to pay off any outstanding debts. 

Can I take out a new mortgage on my home to pay off the existing debt? 

Before you can successfully apply for a remortgage with any lender, you’ll need to meet their specific eligibility criteria. In addition, each agreement will include different terms like the length of the agreement, fees and interest rates.   

Checking your eligibility before you apply to any lenders is a wise idea so you have an understanding of which ones are more likely to accept you and which ones it would be best to avoid. 

In order to be eligible for a remortgage, you’ll need to have equity in your property. This usually means that you’ve paid off some of your current mortgages or that the value of your property has increased since you made the initial purchase. The more equity you have, the wider your choice of remortgage lenders will be.  

Your mortgage broker will determine if you qualify by taking the following into consideration: 

  • Your age 
  • Your annual gross income
  • The regularity of your income 
  • The regularity of your income 
  • Your outgoings including debts, childcare, travel, groceries, utilities  
  • Your credit history  
  • The market value of your property 
  • How much equity do you have 
  • How much do you want to borrow 

How can I tell if I’m qualified to remortgage? 

If you’re unsure about which mortgage lender to choose, consult a mortgage broker. They will help take into account all the factors that other lenders will look at before you apply so that you don’t spend time and money applying to the wrong one only to be rejected later on. Lots of homeowners make this mistake- going straight to their current lender without first checking their eligibility or comparing deals available from other sources. 

If you originally were approved for a mortgage to buy your property, chances are that your circumstances have changed now. For example, you could have switched jobs, become self-employed, or had more children or parents move in with you–all of which would affect your income.  

On the other hand, if you’re closer to retirement age, that can also affect your choice of lenders. As you get closer to retirement, your income will face more scrutiny from potential lenders because oftentimes there is a drop in annual income once an individual retires.  

With inflation and interest rates on the rise, many lenders have withdrawn their most affordable mortgage products from the market. 

Although good deals are still out there, you may need to pass stricter affordability checks to qualify, such as having equity built up in your property and a strong credit history. 

If I check my eligibility, will that lower my credit score? 

A broker will usually do a soft credit check to see if you’re eligible for a remortgage, which doesn’t affect your credit report or score. 

A hard credit check will happen if you decide to remortgage, so the lender can see your repayment history and financial background.  

Consequently, you must check beforehand if the lender is likely to approve you. Otherwise, you might get rejected when applying for a remortgage. 

If I have poor credit, will that block me from remortgaging to cover my debts? 

You may be under the impression that you need to have good credit in order to qualify for a remortgage, but this isn’t always the case. In fact, there are some lenders who specialize in working with borrowers who have bad credit. So if your credit score is less than perfect, don’t despair–you still have options.  

Even if you have bad credit, that doesn’t mean you can’t remortgage. Just be sure to get advice from a qualified and reviewed broker instead of rushing into making an application. 

If you want to better your chances of being approved for a remortgage with the intent of paying off debt, follow these steps 

  • Don’t apply for credit ahead of your remortgage application 
  • Make sure you’re signed up for the electoral 
  • Manage your current debts by making repayments on time 
  • Have savings if possible 
  • Spend your money wisely and don’t gamble or spend large amounts on retail 
  • Organize the documents needed for a remortgage 
  • Provide accurate information about your finances and situation 

Here are some things to think about before you refinance your mortgage 

  • Do you have enough equity in your home? 
  • What will the new loan cost? 
  • Will refinancing pay off all of your debts? 
  • How will taking on more debt affect your monthly expenses? 
  • Could you afford the repayments of the new remortgage? 
  • Do you have enough money to pay any fees involved when remortgaging?  
  • What type of remortgage would suit your situation best, a variable rate or fixed-rate mortgage? 

Other questions about remortgaging to pay off debt 

Can I increase the term length on my mortgage in order to pay off the debt? 

It is possible to reduce your monthly mortgage payment by changing the term length of your agreement. This could free up extra money to pay off other debts you have. However, be sure to calculate all of your options with a mortgage broker before making any decisions, so that you know how much you could save each month and whether it would be enough to cover your debts. 

If you’re not interested in remortgaging, what are your other options? 

Loans that don’t require collateral 

The interest rates for a personal loan or credit card can be more expensive, and the repayment term is usually shorter–anywhere from months to 10 years. The amount you’re charged for a personal loan, as well as the terms of repayment, will differ depending on which bank or lender you use. They base this on factors such as your credit history, level of debt and income. To get the best deal possible, compare different options on the market to see what might cost less overall. 

Getting a loan from family 

If you have close family members who are willing to help you out financially, you could save money by borrowing from them instead of taking out a remortgage or personal loan. 

If you plan on asking your family to help with debt, it’s crucial, to be honest about the amount and have a repayment plan set up. This way, everyone involved is aware of how much needs to be borrowed and when repayments will happen. You could also consider offering a contract as an extra level of protection for all parties involved. 

Our team of unbiased professionals can help you remortgage to consolidate your debt. 

At Your Mortgage Experts, we pride ourselves on having a team of discrete advisors who cell will never make you feel judged for wanting to remortgage to pay off debt. Our mortgage brokers have helped countless people in the same situation as you, so they will be more than happy to answer any questions you may have. 

  • While anyone can suddenly find themselves in debt for various reasons, there is always help available. You can give us a call at 02081541111 and we’ll make sure someone gets back to you with the information you need. 
  • Before you even think about remortgaging, make sure you have enough saved up to pay for any and all fees involved. 
  • What kind of remortgage would work best for your individual circumstance, a variable rate or fixed-rate mortgage? 

Call us on: 020 8154 1111 

Or drop us a line: 

Your Mortgage Experts, London W9 2HQ. 

Luca Bertolino

Mortgage Expert

Your Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.

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