Remortgage House To Pay Off Debts

Can you remortgage a house to pay off debts? We go through all your options here.

by Mark Robinson, Director – Albion Forest

Can I Remortgage A House To Pay Off Debts?

Depending on your situation you may be able to remortgage your house to pay off debts. This will depend on a few factors:

What your LTV is – This is the percentage of your home that is currently mortgaged. Many lenders won’t lend above 85% or 90% when consolidating debt.
What your current credit score is – When you remortgage a house to pay off debts you will likely have to be credit checked. Therefore you may need a certain score in order to get a mortgage with your chosen lender.
What debt are you consolidating – Some lenders may not let you pay off certain debts in this manner, always check with the lender which debts you are able to pay off.

Is It A Good Idea To Remortgage To Pay Off Debt?

It may or may not be a good idea to remortgage your house to pay off debts. This will depend on various factors. However, the main thing to remember is that most debts are short term, and generally speaking, mortgages are more long term. So you may well be taking a debt that is over a few years, and stretching it over a few decades.

Paying debts over this long timeframe may result in you paying drastically more interest over the term. This may be acceptable to you, but is always worth considering before you submit an application.

Can I Release Equity From My House To Pay Off Debt?

There are various methods to release equity from your house to repay debts, such as:

Remortgage
Further advance
Equity Release
Second Charge Mortgages

Each of these options has its own strengths and weaknesses, and if you are unsure which is best for your situation you should always speak to a professional that will be able to go through these options with you.

What Loan-To-Value Can I Get If I Remortgage House To Pay Off Debts?

Generally lenders will probably cap this at 85% of the value of your home, however, some may go as high as 90 or even 95% of the value in order to remortgage your house to pay off debts.

This will largely depend on the individual lenders criteria and will vary from lender to lender.

Should I Take Out A Second Mortgage To Pay Off Debt?

A second mortgage may be an option to pay off debt. However, unlike remortgaging it will likely be that you have a second charge on your home. These tend to be more expensive, and much higher interest rates that a first charge remortgage or further advance. This usually makes them a last resort for most people.

Having Enough Equity To Remortgage

You will need to have enough equity in your home in order to remortgage to pay off debts. This means that you will likely need to have at least 10-20% equity in your home in order to remortgage to pay off debts.

However, some lenders may require lower amounts, and if you are in this situation it is worth speaking to a specialist mortgage advisor that can go through your options with you.

Is Further Borrowing Allowed With Your Current Mortgage Deal?

Some mortgage products and lenders allow you to take a further advance on your current mortgage. This means that you can borrow more than you originally took out for various purposes. Some lenders let you do this to consolidate debt, however, others may only allow this for things such as home improvements.

You can always speak to your current lender first to see what they can offer.

Does Your Mortgage Term Enable You To Remortgage Now?

Most mortgage products have a product end date, if you want to remortgage before that end date you will have to pay an early repayment charge.

This is mostly common with Fixed rate mortgages, but could apply to variable rate mortgages as well.

You should always take into account whether you will need to pay your early repayment charge, or even wait a few months for the product end date if possible.

What Is Debt Consolidation?

Debt consolidation is what lenders and brokers call it when you pay off debts using a loan secured to your property. This often means paying more interest over the term of the mortgage than you would on an unsecured debt, or even on some secured debt.

Can I Remortgage To Consolidate Debt?

It will depend on your Loan-to-value (LTV), which means the percentage of your property that is currently mortgaged. However, many people can remortgage to consolidate debt.

You should carefully consider whether doing so is the best option for you, as many people will pay a lot more interest over the term of the mortgage than they would over the term of unsecured debt.

Should I Remortgage To Pay Debt?

Whether you should remortgage to pay debt is largely dependent on whether you can afford to continue paying it off in the short term.

Lenders do not like to see people repeating the same patterns, so you may find it difficult to consolidate debt if you have done it previously. However, some lenders are ok with this, but you may want to speak to a specialist to discuss your options.

Can I Clear Credit Card Debt By Remortgaging?

Credit card debt is the most common thing to be consolidated into a mortgage. Many people end up doing this in order to clear their cards and improve credit scores.

This is a relatively simple process, however it is important to remember that credit cards are considered short term debt, and by consolidating them you may be extending them over a much longer term.

Can I Remortgage a House To Pay Off Debts With A Help To Buy Loan?

Unfortunately whilst having a help to buy loan you cannot generally consolidate other debts. However, you should always speak to a specialist if you are considering this.

This is not usually a condition of the mortgage, but rather a condition of the help to buy scheme.

Are There Any Alternatives To Remortgage A House To Pay Off Debts?

There are quite a few alternatives to remortgage your house to pay off debts. They are generally considered to be:

Further advance	A further advance is a second loan from your current lender to allow you to borrow extra. They will generally have their own product dates, and rates of interest.
Second Charge Mortgages	A second charge mortgage is with a separate lender to your first charge mortgage. They generally have higher rates of interest.
Equity Release	If you are aged over 55+ and have few other options you may be able to get equity release in order to consolidate debts. You will likely need to consolidate all debts including your mortgage to do this. Equity release products are generally considered a last resort.