Tired of juggling multiple payments every month?
Simplify your finances with a remortgage to consolidate your debts. You can save yourself money in interest repayments and reduce the overall cost of your debts.
Why consolidate debt?
Having large amounts of unsecured debt in the form of credit cards, store cards and personal loans can be a very expensive way to borrow. Unsecured borrowing is typically high-interest borrowing, so consolidating all your unsecured debts into one large secured loan can make your debts much cheaper, as secured borrowing is generally available at much lower interest rates. Replacing your individual debts with one consolidation loan also means that you only have to deal with one repayment each month, rather than having to keep up with multiple repayments.
Why consolidate debt using my mortgage?
Using your mortgage as a means of debt consolidation is the most affordable way to roll up your debts. This is because your mortgage is the cheapest form of secured borrowing available, as a mortgage is the primary loan against your home. This is very attractive to prospective lenders, as it is a very low-risk form of lending, allowing them to offer low, competitive interest rates and flexible loan terms.
How?
If you have a mortgage already and wish to borrow more money in order to consolidate your unsecured debts, you should consider a remortgage. A remortgage is essentially re-borrowing money you have already repaid to the lender. However, you should avoid borrowing 100 per cent of your home's value, as this puts you in a difficult position if property proces fall - you may find the most you can borrow is up to around 85-90% of your home's value, due to the tightening of the mortgage market.
Managing your finances with a remortgage
A remortgage does not automatically mean that your monthly repayments will rise. It is very common to choose to extend the mortgage length, which means that your monthly repayments will not rise, but that you will continue to repay your mortgage for a longer period than originally intended. However, by choosing this option you will repay more interest on the loan overall, as the interest charged increases when the mortgage term is increased. You can avoid greatly increasing interest charges by choosing to repay more each month and keep the mortgage term unchanged. This will mean that more of your money goes towards debt repayment each month, but it is a good idea to keep your total loan cost as low as possible.
What to be aware of
Borrowing against your home always carries risk, as your failure to complete on your repayments could result in you losing your home. As a result, if you have taken the step to consolidate your debts with a remortgage, your priority should be making sure that you do not run up unsecured debts all over again.
To compare remortgages with TotallyMoney.com click here.
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