By Dom Spencer - June 14th, 2024 Posted in Mortgage Guides No comments


When debt from credit cards, store cards, loans and overdrafts start to pile up, it can feel very overwhelming. Especially if you’re missing payments because of the volume of different lenders chasing you.

A debt consolidation mortgage offers a way to make the process of repaying debt simpler, less stressful and more manageable.

What Is a Debt Consolidation Mortgage?

A debt consolidation mortgage is when you move all or some of your existing debts and house them with one lender (your mortgage supplier), rather than making multiple payments to different providers.

This usually means transferring to a lower interest rate and reduced monthly payments, which can help alleviate short-term financial strain.

How Does Debt Consolidation Work?

If you find yourself struggling with debt repayments, you can combine multiple loans with your existing mortgage, which usually results in lower monthly payments over a longer period.

A broker, like Your Mortgage People, can talk you through your unique financial situation. If it feels daunting, we’re here to help.

When you apply to consolidate debt, the chances of a lender accepting you will depend on several factors, including income, credit history and the equity you hold in your home.

You’ll be in a very strong position if you’ve repaid a lot of your mortgage or if your property has increased in value.

Things to Consider Before Applying

Before considering whether a debt consolidation mortgage is right for you, think about why you’re struggling with your existing debt.

Ask yourself why this loan is good financial decision when you’re already unable to pay off your existing commitments.

Although a consolidation mortgage might reduce your payments in the short term, it’s likely you’ll pay more in interest over the loan agreement. Think about the implications of increasing your loan term before proceeding with debt consolidation.

When applying for debt consolidation, you’ll also have to decide how long you want the loan term to be.

While taking out the longest term might maximise the reduction in your monthly payments, it’ll also mean you pay far more in interest overall. So don’t be tempted by the lower payments if you can pay more!

With a debt consolidation mortgage, the lender uses your home as security in case you don’t make your repayments. With this in mind, you shouldn’t apply for debt consolidation if you don’t think you can meet the repayments, as it could result in you losing your home.

A few pros

  • Your debt is easier to track, as it’s with one lender
  • Lower monthly payments
  • You’re less likely to be subject to varying interest rates, making it easier to budget for the future
  • Making repayments in full and on time can help increase your credit score
  • You might be able to make overpayments if the interest rate is low, which is a quicker way to pay off your total debt

Can I Apply With Bad Credit?

People with a poorer credit history may still be able to borrow on a mortgage to repay their debts – the important thing is to find great advice and identify a lender with criteria that you can meet.

Is Debt Consolidation Right for You?

If you’re struggling with debts and think a consolidation mortgage is a good option, it’s time to speak to an advisor who can help.

It’s important to remember that you can reduce your monthly payments with debt consolidation, but you have to be disciplined with your debt or your house might be at risk.

Call us today on 01489 346624 to run through all your options with Your Mortgage People. We exist to find the perfect final solutions for you.

Although all our advisors are CeMAP qualified, we don’t like unnecessary jargon – our teams speak in plain English and take care to appreciate the uniqueness and demands of every enquiry we receive.

If you’re choosing the best way forward for you, we’re here to help.

Please visit our Customer Support Page if you’re struggling financially and don’t know who to turn to. We list out a list of organisations and charities that can give you the assistance you need.

Need help with some of the terms used above? Why not visit our guide to mortgage terms.

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