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Mortgage Advisor & Director
If you have debts and it’s time to remortgage, you may be wondering if it's possible to consolidate it in one place. Here, you'll learn whether consolidating debt onto your mortgage is an option, how to do it, and how we can help.
Can you remortgage to consolidate debt?
Yes. This could be an option if you are a homeowner with enough equity and you fit the lending criteria for a debt consolidation remortgage. This would work in the same way as a regular remortgage, but you would be borrowing extra against your equity to clear your debt.
Debts that you can secure against your property include:
- Loans
- Credit card debt
- Hire purchase agreements
- Student loans
- Store cards
- Overdrafts
Most mortgage lenders impose strict loan-to-value (LTV) caps on borrowers who are consolidating debt, but your choice of deals should increase if you use a broker.
Lending criteria and LTV requirements
Most mortgage lenders cap the LTV at 60-85% for debt consolidation remortgages, which means that you will need to have 35-40% equity in your home to serve as the deposit.
The other requirements you will need to meet are as follows:
- Time in the property: The vast majority of lenders won’t let you remortgage for debt consolidation until you have owned your home for at least six months.
- Type of debt: Most types of debt can be consolidated, although some lenders place restrictions on certain types. For example, gambling debt may not be permitted.
- Mortgage type: Some lenders won’t let you consolidate debt if any part of the mortgage is interest-only. Others might decline a debt consolidation remortgage if your home was purchased through a scheme such as Shared Ownership.
- Age: You might need specialist advice if you will be aged between 75 and 85 during the mortgage term, as some lenders won’t approve later-life borrowers.
- Credit history: Having bad credit on top of debts can be an added complication. See the section on bad credit later in this article for more information.
- Property type: If you are consolidating debt against a non-standard property (i.e. one with unusual features or not made from bricks and mortar), you might need a specialist lender as this can be an added complication for mainstream banks.
While the criteria above applies to most mortgage providers, there are specialist lenders who can be more flexible - get in touch to find out more about your options.
How to get a debt consolidation remortgage
We recommend following the steps below to begin your application:
Calculate your LTV: You can do this by adding your outstanding mortgage balance to the extra you need to borrow to cover your debt. Divide this by the value of the property, multiply the total by 100 and you have your loan-to-value ratio.
Compare rates and deals: Once you know your LTV, you will get a clearer idea of the remortgage deals you qualify for. You can then compare rates and deals across the market for free and secure an agreement in principle through Teito.
Speak to a mortgage broker: This is the best way to boost your chances of securing the right debt consolidation remortgage available. After you have compared rates through us, one of our remortgage brokers will review your case to offer bespoke advice and make sure you are getting the best deal that you qualify for.
Ready to compare remortgage rates and access broker support? Get started here!
Which lenders are available?
Below you will find examples of lenders who currently offer debt consolidation remortgages, along with some of the specific criteria you can expect from them.
- Kent Reliance: Offers a higher maximum LTV of 95% but rates might be higher for borrowers who need to borrow this much against their equity.
- Bluestone: May decline applications if gambling debts are being consolidated.
- Leeds Building Society: Offers debt consolidation remortgages, but not for homeowners who purchased through Help to Buy or Shared Ownership.
- Accord Mortgages: Will allow this for up to 10 different debts, but places a cap of £50k on the amount of secured debt that can be consolidated.
- Natwest: Only allows debt consolidation on capital repayment mortgages and will decline applications for this from interest-only mortgage holders.
Several lenders, including Skipton and Bath Building Society, do not offer remortgages for debt consolidation, but the above is merely a snapshot of a vast market of lenders who do.
You can compare rates and deals from these lenders and more for free on Teito, or have one of our brokers do it for you, below:
Find a better debt consolidation remortgage deal on Teito
Can you get approved with bad credit?
Some people applying for debt consolidation mortgages may have bad credit. For example, they may have missed payments or are in arrears for the debts in question.
With moderate forms of adverse credit like these, it is still possible to get approved for a mortgage, but can be harder with more severe credit problems such as individual voluntary arrangements (IVAs), debt management plans (DMPs) and bankruptcies.
It can be more difficult to get the best deal on a remortgage with bad credit, and your chances of securing the finance you need will depend on these factors:
- The severity of your credit problems
- How long ago they were
- Whether there are mitigating circumstances for them
- How much equity you hold (the more, the better)
You can read more about remortgaging with bad credit in our standalone guide.
Should you remortgage to consolidate debt?
To help you decide whether it is a good idea, the table below highlights the advantages and disadvantages of remortgaging for debt consolidation.
Advantages | Disadvantages |
Making one debt payment instead of several can make budgeting easier | Putting debts onto a mortgage might mean paying more in the long run, since you are spreading them out over the term |
Monthly repayments will likely go down | Reduces the equity in your property |
Interest rates on property are typically lower than on unsecured finance | Your home would be at risk if you start struggling to make your debt repayments |
Having your debts in one place might mean you are less likely to miss payments | Rates can be higher than for regular remortgages due to the consolidated debt driving up the loan-to-value ratio |
Alternatives to consider
If you cannot remortgage, or do not wish to, there are other ways you could consolidate debt onto your property. The main alternatives to consider are as follows:
- Further advance: This is essentially borrowing extra from your existing lender without going through the full remortgage process. The terms of your deal don’t have to change but the additional borrowing might be charged at a higher rate of interest. This can be an option if you are locked into a fixed-rate mortgage.
- Secured loans: Also known as a second mortgage or second charge mortgage, these are secondary debts that sit behind the main mortgage on your property, secured against your equity. You don’t need to use your existing lender for a secured loan and they can be a useful alternative when remortgaging isn’t an option.
There may also be other alternatives you could consider if you cannot remortgage but need to consolidate debt. Speak to a mortgage broker to find out what your options are.
Find out how our brokers helped a homeowner remortgage to consolidate their debts
Why choose Teito for your debt consolidation remortgage?
You can choose your own remortgage deal through Teito for free and secure an agreement in principle within minutes. Here are just some of the reasons why people choose us:
- Exclusive rates and deals are available
- We have whole-of-market brokers on hand to help
- Our advisors can offer bespoke advice about debt consolidation
- We are 5-star rated on leading review websites
Ready to compare interest rates and take advantage of a free, no-obligation chat with a broker who specialises in debt consolidation remortgages? Get started here.
FAQs
Yes and the process is the same as it would be for consolidating debts onto a residential mortgage, but there are fewer lenders available in the buy-to-let space, especially if you have a high loan-to-value ratio. Most lenders will go no higher than 70-75% LTV.
Lenders who offer debt consolidation remortgages for buy-to-let landlords include BM Solutions, Kensington, Santander and Accord Mortgages.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.