Struggling with debt?

Can I pay off my debts with a mortgage?

That’s a question we’re hearing more & more frequently at the moment. Energy prices are up. We’re in a cost of living crisis and if you’re on a variable rate (SVR) mortgage then you’ll have noticed your monthly payments have gone up alarmingly.

With average Credit Card rates now at 22%, their highest in 25 years, for many families it makes sense to roll that debt into a lower interest rate mortgage and lower their monthly outgoings. We’re here to help so let’s have a chat and put our decades of lending experience to the test. We’ll look at your unique financial circumstances, confidentially, sympathetically and will only recommend solutions that work for you.

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A debt consolidation mortgage is simply when you take your existing short-term, high-interest debts such as store cards, credit cards, car loans and the like and add those into your mortgage amount – paying off the original loan in the process.

This then means that you’re no longer making high monthly payments on those borrowings but instead are making repayments on them as part of your mortgage which runs for a longer time, but at a much lower interest rate – so leaving you with more disposable income each month rather than struggling to make your payments.

A debt consolidation mortgage is a loan you use to pay off your existing debts as well as enabling you to buy your home.
Say you owe £4,000 on one credit card, £2,500 on a store card, and £1,000 on your overdraft, you could include that £7,500 in your mortgage instead and lower your monthly payments. Now we know that everyone’s personal circumstances are different and the figures will vary for you but if we say that the interest rate on your cards is 22% then you’d be paying £137.50 every month in interest alone before paying any of the loan amount itself back. Whereas if your mortgage rate was 4%, you’d be paying £25/month in those interest payments.
Note this doesn’t include any repayments of the borrowed amount – the capital – but does give an idea of the difference consolidation can make to your monthly outgoings.
So a debt consolidation mortgage is effectively swapping a short term, high-interest loan or debt to a longer term but lower interest rate loan combined with your mortgage which helps lower your monthly outgoings.

If you’ve been struggling for some time to make your repayments on credit cards & loans then it’s perhaps not surprising that your credit file might be showing some black marks.

Lenders are interested in knowing that you can easily repay a loan without struggling so if we can find a solution that actually reduces your monthly outgoings then lenders will take that into consideration. Bear in mind we’re experts at sourcing bad credit mortgages so we know which lenders are most likely to lend to borrowers in particular situations.

Rest assured, we’re an FCA Regulated whole of market underwriting broker. It’s our job to look at your entire financial situation holistically and then advise what’s best for you. And we have to be able to prove the quality of our advice to the Regulator!

So if it’s not the right choice for you – We’ll tell you!

And if it is the right choice – We’ll tell you!

There’s no obligation, the choice is always yours. Consolidating debt makes sense when you have several high-interest payments that you’re struggling to cover from monthly cashflow, it doesn’t make sense if it doesn’t actually lower your outgoings.

We start the process with a mortgage factfind, this is a document that helps gather all the information we need in one place and forms the basis of our advice. You’re welcome to complete it straight away and send it over or we can talk over your concerns first, it’s your choice.

It all depends. A condition of the consolidation mortgage might be that you pay off – and then close – the credit accounts that you’ve just consolidated. But if not, you just need to be aware of the temptation to run up more debt on the account which would put you back where you started with new mortgage debt on top. Then you’d be back to having a problem making the repayments.

So we’d generally suggest closing any paid-off credit accounts, perhaps just retaining one credit card for emergency use only!

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