In 2022, it’s far too easy to get in debt – and once you’re in debt, it can feel like a weight on your shoulders, and a struggle to get out of. Refinancing a debt with a mortgage could be a great way of reducing your monthly payments and making your finances more manageable.

If you’re considering remortgaging your home to consolidate debt, or you’re just looking at your options, then you’re in the right place.

Keep reading to learn about the remortgaging process, whether you can remortgage to pay off debt, and what you need to consider when remortgaging your home.

What Is Remortgaging?

Remortgaging is applying for a new mortgage while remaining in your home. Typically, you’ll remortgage with a different lender if you’re offered a better rate that will save you money.

When you remortgage, you’re essentially getting a new loan to replace your existing loan, allowing you to pay off your existing mortgage with the funds obtained from the new mortgage – using the same property as collateral.

Can I Remortgage To Pay Off Debt?

In the UK, roughly 63% of adults have personal debt. In most cases, it’s unavoidable – whether it be due to family issues, divorce, the loss of a job, or poor health. The good news is that if you’re in debt, remortgaging your home may help relieve some stress.

In fact, one of the main reasons that people will remortgage their home is to pay off debt. However, this can only be done if you have enough equity in your home to qualify for a larger mortgage, whether it be with a new lender or your current lender.

Remortgaging to pay off debt allows you to settle your existing debt with your debtors – however, you’d be moving the debt onto your mortgage, as well as paying interest for the entirety of the mortgage term.

Although it may feel like an easy decision to remortgage your home to relieve the stress of debt, it’s something that you should take time to consider. We always recommend speaking to a mortgage broker before committing to another term with a different lender.

A mortgage advisor can find you the best rates and give you the information and guidance you need to make the best decision.

For example, if you currently owe more than 80% of your home’s value, then it may not be the best idea to borrow more money against your home – any good mortgage advisor will tell you this.

Another option if you’re looking to pay off debt is refinancing your mortgage agreement, which can reduce your monthly payments. This can help to free up capital for any regular debt payments.

What Do I Need To Consider When Remortgaging To Pay Off Debt?

One of the main things that you should consider if you’re thinking about remortgaging to consolidate debt is exit fees or early repayment charges.

Before making any verbal or written agreements, be sure to check whether you’ll actually be saving money by opting for another lender at a different rate. In many cases, it works out the same price after the exit fees and early repayment charges – and sometimes even more expensive.

We recommend consulting with a quality mortgage advisor who can help you gain a solid understanding of the process and find you the best rates, allowing you to make your decision with confidence.

Another thing to consider is your credit report. If you’re in debt and struggling to keep up with payments, then this may reflect in your credit report.

The unfortunate fact is that sometimes, missing payments is unavoidable – but be sure to prioritise the payments that will affect your credit score and show up on your credit report.

If your credit score is in poor condition, then it’s unlikely that you’ll get accepted for a better mortgage rate. With a bad credit file, you may find it difficult to remortgage with a good rate.

However, there’s a chance that a quality mortgage broker can help you find a good deal when you’re remortgaging to pay off debt.

Mortgage advisors have connections with lenders and are more likely to find you desirable rates than if you were to look by yourself.