A debt consolidation mortgage could help you improve your situation if debt is holding you back. But how exactly does a debt consolidation mortgage work, is it more cost-effective than paying your debts back over a longer period, and is it right for you?\r\n\r\nWe answer all those questions and more in this article, and you\u2019ll find the following topics covered below...\r\n<ul>\r\n \t<li><a href="#what-is">What is a debt consolidation mortgage?<\/a><\/li>\r\n \t<li><a href="#work">How does it work?<\/a><\/li>\r\n \t<li><a href="#borrow">How much could I borrow?<\/a><\/li>\r\n \t<li><a href="#difference">Debt consolidation vs second mortgage: what\u2019s the difference?<\/a><\/li>\r\n \t<li><a href="#lenders">Which providers offer debt consolidation remortgages?<\/a><\/li>\r\n \t<li><a href="#expert">Speak to an expert<\/a><\/li>\r\n<\/ul>\r\n[feefo-banner]\r\n<h2 id="what-is">What is a debt consolidation mortgage?<\/h2>\r\nA debt consolidation mortgage is where you take out a single loan using the available equity in your property to help pay off debts such as car loans and hire purchase agreements.\r\n\r\nBy releasing some of the money you\u2019ve already paid towards owning your home, you could reduce the amount of debt you owe overall, simplify your budget and take the pressure off your finances.\r\n\r\nA debt consolidation mortgage could help you reduce your overall monthly payments, leaving you with \u2018freed-up\u2019 cash to put towards your debts or to provide you with a more affordable standard of living.\r\n\r\nThis type of loan is also referred to as debt consolidation re-mortgage because, whilst while a mortgage and re-mortgage are normally two separate products, in this instance, they are referring to the same product.\r\n<h2 id="work">How does it work?<\/h2>\r\nIn order to qualify for a debt consolidation mortgage, a lender will assess the following:\r\n<ul>\r\n \t<li>Your<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/your-credit-score\/"> credit report<\/a> and what debts you have<\/li>\r\n \t<li>The value of your property<\/li>\r\n \t<li>What percentage of your home you own outright<\/li>\r\n \t<li>How much you want to borrow compared to your income<\/li>\r\n<\/ul>\r\nMany lenders will require you to sign an undertaking drawn up by a solicitor before agreeing to lend.\r\n\r\nThis is an agreement where you commit to repay your debts in full on completion of the advance, though if you already have enough income to deduct your commitments from, then this won\u2019t often be necessary.\r\n\r\nHowever, if your old mortgage deal has a great rate of interest that you would lose if you<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/remortgages\/remortgage-guide\/"> remortgaged<\/a> onto a new deal, the good news is that you may be able to consolidate your debts with a<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/second-charge-mortgages\/"> second charge loan<\/a>.\r\n\r\nYou can read about <a href="#difference">how second charge loans work<\/a> further down in this article.\r\n<h3>Why would I consolidate debts into a mortgage?<\/h3>\r\n<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/remortgages\/remortgage-to-pay-off-debt\/">Remortgaging to clear debts<\/a> could work out cheaper for you in monthly payments and make your finances easier to manage.\r\n\r\nUnsecured debts typically have higher rates of interest compared with secured loans, as there is no security for the lender to fall back on should you be unable to pay your debts back. Because of this, you could get a better rate than if you continued to pay back your loans as normal or if you took out an unsecured loan to settle the other outstanding debts.\r\n\r\nWith a debt consolidation mortgage, you could pay off the following unsecured debts:\r\n<ul>\r\n \t<li>Credit cards<\/li>\r\n \t<li>Personal loans<\/li>\r\n \t<li>Payday loans<\/li>\r\n \t<li>Overdrafts<\/li>\r\n<\/ul>\r\nTheoretically, if you had \u00a35,000 on one credit card with an interest rate of 24.5%, plus a loan of \u00a310,000 at 11.5% APR plus another loan of \u00a37,500 at 16.95% APR, your combined debts would come to \u00a322,500.\r\n\r\nWith interest over a 10-year period, your amount paid could reach a whopping \u00a345,923 \u2013 that\u2019s \u00a323,423 worth of interest.\r\n\r\nHowever, with a 10-year debt consolidation remortgage with an interest rate of 5%, you could pay back a total of \u00a328,638 instead.\r\n\r\nBefore you take out a debt consolidation mortgage, speak with one of the expert<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/remortgages\/remortgage-brokers\/"> remortgage brokers<\/a> we work with for a free, no-obligation chat. They can review your circumstances and recommend your best course of action.\r\n<h3>Is it a good idea?<\/h3>\r\nMost experts would advise you to think carefully before considering a debt consolidation mortgage.\r\n\r\nWhile having one debt instead of several can make them seem more palatable and the promise of paying a lower interest rate is enticing, debt consolidation mortgages are not without their drawbacks, and you should always take professional advice first.\r\n\r\nHere are some things you should be aware of before putting debts onto your mortgage\u2026\r\n<ul>\r\n \t<li>Converting unsecured debt into a debt secured against your property potentially puts your home at risk if you fail to keep up with repayments<\/li>\r\n \t<li>While mortgage interest rates are typically lower than that of unsecured debts, terms are much longer, meaning you could end up paying more in the long run. By adding other debts to your mortgage, you\u2019ll be paying interest on them for a longer period. Be sure to weight up the overall cost, rather than just compare rates<\/li>\r\n \t<li>There could be cheaper alternatives to consider, such as balance transfer credit cards. A broker who specialises in debt consolidation remortgages will be able to go through every option with you and help you make the most cost-effective decision<\/li>\r\n \t<li>You might have to remortgage. Some lenders may let you borrow more to consolidate debt without refinancing, but if you do need to remortgage, be sure to find out what costs and fees you could incur<\/li>\r\n<\/ul>\r\n<h2 id="borrow">How much could I borrow?<\/h2>\r\nThe amount you could get will depend on how much equity you have freed up, your credit history (if there's any previous bad credit, a<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/bad-credit-mortgages\/remortgage-with-bad-credit\/"> remortgage with bad credit<\/a> may also be possible), and if you meet a lender\u2019s<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/mortgage-affordability\/"> affordability criteria<\/a>. Your total<a href="https:\/\/www.onlinemortgageadvisor.co.uk\/mortgage-affordability\/debt-to-income-ratio\/"> debt-to-income ratio<\/a> may also be factored in, though each lender will allow you to borrow subject to the product\u2019s limits.\r\n\r\nSome lenders may agree to let you borrow up 90% loan-to-value (LTV) for properties worth \u00a3500,000 and over, whereas other lenders will cap how much you could borrow to consolidate debts, for example, \u00a330,000 or \u00a350,000.\r\n\r\nOther lenders are more concerned about how your debts were accrued and will not base their decision to lend on your debt-to-income ratio \u2013 instead, your case would be judged on its own merits.\r\n<h2 id="difference">Debt consolidation vs. Second mortgage: What\u2019s the difference?<\/h2>\r\nUnlike a debt consolidation re-mortgage which puts your mortgage on a new plan and raises cash to pay off your debts, a second charge mortgage is a type of secured loan, usually taken out with a separate lender, which uses your home as security. This means that you\u2019ll have your first mortgage (first charge loan) plus a second mortgage, which you can use to pay off your debts.\r\n\r\nA second charge loan may be a suitable alternative option to a debt consolidation mortgage as you would still be able to keep your first mortgage without losing the interest rate, which may be better than the rates you could secure today.\r\n<h2 id="lenders">Which providers offer debt consolidation remortgages?<\/h2>\r\nFortunately, many lenders offer debt consolidation re-mortgages, though the lending criteria for each can vary greatly.\r\n\r\nSome well-known lenders who will consider offering these products\u00a0 include:\r\n<ul>\r\n \t<li>Natwest<\/li>\r\n \t<li>Nationwide<\/li>\r\n \t<li>Bluestone<\/li>\r\n \t<li>HSBC<\/li>\r\n \t<li>Halifax<\/li>\r\n \t<li>Barclays<\/li>\r\n \t<li>RBS<\/li>\r\n \t<li>Virgin Money<\/li>\r\n \t<li>Accord Mortgages<\/li>\r\n<\/ul>\r\nHowever, there are plenty of other mortgage lenders who cater for individuals with specific needs, such as bad credit. See below for more information on how a broker could help you.\r\n<h2 id="expert">Speak to a debt consolidation mortgages expert<\/h2>\r\nBy working with an expert broker who specialises in debt consolidation remortgages, you\u2019ll stand a much better chance of finding the best deal for your needs and circumstances thanks to their \u2018whole-of-market\u2019 access. They may even be able to secure deals that aren\u2019t available direct to the public or suggest a more viable alternative to adding debt to your mortgage.\r\n\r\nWe offer a free broker-matching service that will pair you up with the advisor who is best positioned to handle your case. <a href="https:\/\/enquiries.onlinemortgageadvisor.co.uk\/match-me-with-a-remortgage-specialist">Make an enquiry<\/a> or call us on 0808 189 2301 and see what a debt consolidation mortgage broker could do for you. Your initial consultation will be free and there\u2019s no obligation to take things further.