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Home » Mortgages » Bad Credit Mortgages » Debt Consolidation

Last Updated: 25th September 2023

What is a Debt Consolidation Mortgage?

A Debt Consolidation Mortgage, also known as a debt consolidation remortgage in the UK, is a financial arrangement that combines all your existing unsecured debts (such as credit card balances, personal loans, or medical bills) into a new mortgage. This consolidated debt is secured by your home, and you make a single monthly payment towards it.


How Does a Debt Consolidation Mortgage Work?

Assessment of Existing Debts: Begin by compiling a comprehensive list of your current unsecured debts, including their outstanding balances and interest rates. This evaluation helps determine the total amount you need to consolidate.

Consultation with a Mortgage Expert: Seek guidance from a mortgage expert or broker who can assess your financial situation, credit score, and equity in your home. They will help you determine the feasibility of a Debt Consolidation Mortgage.

Mortgage Application: Once you’ve chosen to proceed, you’ll apply for a new mortgage that includes the debt consolidation amount. The lender will assess your eligibility based on your creditworthiness and your home’s value.

Paying Off Existing Debts: After securing the new mortgage, you can use the funds to pay off your existing unsecured debts in full. This step effectively clears those debts, leaving you with a single consolidated mortgage.

Single Monthly Payment: With your new Debt Consolidation Mortgage in place, you’ll make a single monthly payment towards it. This payment is typically at a lower interest rate than the unsecured debts, making it more affordable and manageable

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*Note: Do not enter any symbols, commas or letters. Enter simple numbers only. These figures are only illustrative. All mortgages are subject to the applicant(s) meeting the eligibility of the specific lender. An assessment of your needs will be confirmed before a recommendation can be made.

Advantages of Debt Consolidation Mortgages:

Lower Interest Rates: Debt Consolidation Mortgages often come with lower interest rates compared to unsecured debt, leading to potential savings on interest payments.

Simplified Finances: Managing one monthly payment is more convenient and less stressful than handling multiple debts.

Considerations and Potential Drawbacks:

Secured by Your Home: Remember that your home is collateral for the Debt Consolidation Mortgage. Failing to make payments could result in the loss of your home.

Lengthened Repayment Period: While monthly payments may be lower, extending the repayment period may result in paying more interest over the long term.

Financial Discipline: Consolidating debt doesn’t eliminate it; it merely simplifies payments. Maintaining financial discipline is crucial to avoid accumulating new debt.

Is a Debt Consolidation Mortgage Right for You?

To determine if a Debt Consolidation Mortgage aligns with your financial goals and circumstances, consult with one of our mortgage advisors. They can provide personalised advice and assist you in making an informed decision.

In conclusion, Debt Consolidation Mortgages offer an opportunity to simplify your finances, reduce interest costs, and work towards a debt-free future. If you’re considering this financial strategy, contact our team of experts today. We’re here to provide the guidance and support you need on your journey to financial freedom.

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