Debt Consolidation Home Loan
A debt consolidation home loan allows you to take out a second mortgage that is large enough to repay existing debt. Your existing debts will usually be at a much higher interest so it will save you money each month. If you are paying off a credit card, store cards and an overdraft your monthly payments are mostly paying off the interest which means it will take you extra time to become debt free and reduce your monthly outgoings. Taking out a debt consolidation loan will allow you to reduce your monthly outgoings, only make one repayment which will make managing your monthly outgoings much easier.
The main benefit for most people taking out a debt consolidation home loan is to reduce the amount of interest they are paying on their debt and reduce their monthly payments. This allows them to have more income left each month.
When should you consider a debt consolidation loan?
Consolidating your debt with a home loan makes sense if any of the following applies to you;
-You can afford to keep up the monthly repayments.
-You use it for what it was intended and have the opportunity to re-evaluate your income and expenditure.
-You end up paying less interest with your home loan that you are currently. This is a big factor that can save you thousands over the term of your loan.
How can I consolidate my debt onto my mortgage?
Deciding which routes you want to will depend on your current circumstances and assessing which option is best for you is something our specialist brokers will be able to help you. You may not want to give up your current mortgage deal if you are getting market leading rates.
Option 1 – Remortgage all debt to a new lender
you would take out the new mortgage with an additional amount to cover the debt you owe, For example, if you currently have a £100,000 mortgage and £30,000 in unsecured debt you can remortgage to £130,000 and get the best rate available. This will mean you will only have one single payment for your mortgage. The rate you pay will also be better than your current credit card/store card interest rates.
The downside to this option is your new rate may be worse than your current rate, meaning you will end up paying more interest on your current mortgage debt.
Option 2 – Taking out a second charge mortgage
Second charge mortgages or secured loans. This option is beneficial if you have a less than perfect credit rating which will make you ineligible for a standard remortgage. Second charge mortgages are currently not regulated in the same way as standard mortgages; this allows the lender to have more freedom to lend to borrowers who have an adverse credit history. Second charge mortgages are also useful as they allow for the option of self-cert loans that do not require the same level of proof, which is especially useful for self-employed borrowers
Won’t affect your current mortgage rate
More viable for people with an adverse credit history
Self-cert loans make it easier for self-employed borrowers to get a secured loan
Although the rates are much better than credit cards and other unsecured
Lending the rates won’t be as competitive as a standard remortgage
We can help
Know that you are more informed about your options when it comes to consolidating your debt with a home loan it is a good idea to speak to a specialist about the best options for you. Our specialist brokers will be able to find the best option for you that will help you to reduce the level of interest that you are paying on your current debt. If you would like to speak with one of our specialist brokers, fill in one of our enquiry forms.