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Should I Remortgage to Consolidate Debts?

Whilst consolidating your accrued debt with your mortgage may seem like a great idea, and in some cases it can be, managing your debt in this way requires careful consideration. It is vital to ensure all options of managing this debt have been explored, and consolidating through your mortgage is the best viable option for this.

Through this piece, Remortgage Quotes Online will be taking you through what it means to consolidate your debt, as well as weighing up the pros and cons of using a mortgage to manage these debts.

What does it mean to consolidate debt?

Consolidating your debt is quite a straight forward idea. It simply means to collect all of your existing debts and to merge them into a more manageable, singular debt and one single repayment. You then pay off this lump sum monthly as you would have done when all the debts were separate.

The main aim is that the cost of monthly repayments goes down, helping those who are financially struggling to better manage their loan repayments.

Consolidating your debt can also help to better organise all of what you owe into one straight forward repayment plan, reducing the risk of missing payments and enabling you to calculate your monthly repayments and budget accordingly. It can be a great way to help you manage your finances, however is not always the best solution, and will be entirely dependent upon your own unique situation.

Should I remortgage to consolidate my debts?

This will involve taking a list of your outstanding debts and incorporating them into your mortgage repayments – so you can pay for your home and your debts in one single repayment. You will need to speak to your mortgage provider to arrange this.

You should only ever remortgage to consolidate debts when it best suits your financial situation. The answer to this question is therefore entirely circumstantial on how much, and also the type of debt, you are wanting to consolidate.

As an example, if your debt is primarily accrued from a credit card, or other type of high in interest borrowing, consolidating through a mortgage may be the best viable option as it will most likely reduce the cost of your overall monthly repayments. However, this will depend upon your relationship with borrowing, and if you are likely to accrue more debt after consolidating, this is not the right option for you.

You will also have to consider whether this form of debt consolidation is actually viable. Below is a list of some of the main considerations to take into account that will be vital when applying for a remortgage of this nature:

  • Whether your mortgage will let you borrow more money
  • Whether your equity is enough to let you borrow more money – use our remortgage calculator for this.
  • Whether remortgaging will end up costing more than repaying the debts separately

It is worth mentioning that consolidating your debt should only really be used if you have a financial struggle, and a change in your monthly repayment plans is necessary to avoid falling into greater debt, bankruptcy or repossession of your property. Whilst there are some very evident benefits for consolidating your debt, there are also a few cons to consider carefully before going through with such a major financial move.

Pros

  • Reduction in monthly repayments.
  • Organises all your debt into one, easy to manage place.
  • Reduces the risk of missing repayments on numerous, separate debts.

Cons

  • Since your mortgage is secured against your home, falling behind on payments could risk losing your home through repossession.
  • Although paying back less per month, stretching out such repayments can accrue more interest and leave you paying more back in the long run.
  • You may be prolonging the length of time you are in debt for.

Consolidating your debt can be a great way for those struggling financially to take control of their outstanding debts. However, as we have explored through the article, this move is not for everyone, and with some considerably big things on the line (i.e. your home), it’s crucial to know with confidence that this is the most manageable, effective option for you.