Remortgages
Remortgage to Consolidate Debt: Is It a Good Idea?
A clear guide to consolidating loans and credit cards into a mortgage, including the long-term cost, risks to your home and alternatives.
Written and reviewed by Davi Thakar, CeMAP qualified mortgage and protection adviser Updated
You may be able to remortgage to consolidate credit cards, personal loans or overdrafts, but a lower monthly payment does not necessarily mean a cheaper loan. When unsecured debts are added to your mortgage, they become secured against your home. You could pay considerably more interest by spreading them over a longer period.
A suitable decision depends on affordability, the mortgage balance, property value, interest rates, fees, the remaining terms of your existing debts and the alternatives available. If you are struggling to meet repayments, seek free debt advice before taking on more borrowing secured against your home.
Think carefully before securing other debts against your home.
Before recommending a debt consolidation remortgage, I want to see what each existing debt costs to clear, how long it has left to run and what the mortgage balance will be after consolidation. A smaller monthly payment alone is not enough to establish that the move is suitable.
Davi Thakar · Option Finance
What is a debt consolidation remortgage?
A debt consolidation remortgage replaces your existing mortgage with a larger one. The additional borrowing is used to repay other debts, such as credit cards or personal loans. You may end up with one monthly mortgage payment instead of several repayments.
For example, if you owe £180,000 on your mortgage and want to repay £20,000 of unsecured borrowing, you might apply for a £200,000 mortgage, subject to lender approval and costs. This does not remove the £20,000 debt. It changes how the debt is financed and the security the lender holds.
A product transfer with your existing lender usually changes the rate on your current balance. Raising extra money may require a separate further advance or a new borrowing assessment. See our remortgage versus product transfer guide.
How much could consolidating debt into your mortgage cost?
The most important comparison is between monthly affordability and total repayment cost. Both matter, but they answer different questions.
Worked example: £20,000 added to a mortgage
Suppose a borrower has a £180,000 repayment mortgage with 25 years remaining and pays 4.50%. They also owe £20,000 across credit cards and loans, with combined repayments of £450 per month. For illustration, the new mortgage is £200,000 at the same 4.50% over 25 years.
| Illustration | Before consolidation | After consolidation |
|---|---|---|
| Mortgage balance | £180,000 | £200,000 |
| Mortgage rate | 4.50% | 4.50% |
| Mortgage term | 25 years | 25 years |
| Monthly mortgage payment | £1,000.50 | £1,111.66 |
| Separate unsecured debt payments | £450.00 | £0 |
| Combined monthly payments | £1,450.50 | £1,111.66 |
| Change in monthly outgoings | Not applicable | £338.84 lower |
The £338.84 reduction is cash-flow relief, not a proven financial saving. The £20,000 extra mortgage borrowing alone costs approximately £111.17 per month and £13,349.95 in interest if it remains at 4.50% for the entire 25 years. That is £33,349.95 repaid for the additional £20,000 borrowed.
By comparison, a hypothetical £20,000 repayment loan at 4.50% over five years would cost about £372.86 per month and £2,371.62 in interest. This comparison isolates the effect of term length. It does not represent the actual cost of the borrower’s existing debts, which may have different rates, fees and remaining terms.
Method: Repayment figures use a monthly reducing-balance amortisation calculation with 12 monthly payments per year. Values are rounded for display. The illustration assumes a constant rate, no fees and no overpayments. Actual mortgage rates can change, and an adviser must compare the real debts, mortgage offers, fees and remaining balances before recommending a course of action.
Why might monthly payments fall but total interest rise?
A mortgage usually spreads repayment over many years. Even when its interest rate is lower than a credit card or loan rate, paying interest over 20 or 25 years can cost more than clearing the original debt over a shorter period.
The larger mortgage also means less equity in your home. If property values fall, a higher loan-to-value ratio can reduce future mortgage choices. Some debts may have early settlement charges or promotional rates, which must also be considered.
For an independent explanation, MoneyHelper warns about extending debts through a remortgage.
What are the main risks?
Your home becomes security for the debt. An unsecured credit card or personal loan is not normally secured against your property. Once it is added to your mortgage, missed mortgage payments can put your home at risk.
Total interest can increase. The extra borrowing may remain outstanding long after the original debt would have been repaid.
The mortgage rate on your existing balance may change. Switching the entire mortgage can affect the rate paid on the original £180,000, not only on the new £20,000.
Early repayment charges and fees can outweigh the benefit. Leaving your existing deal early may trigger an ERC. Product, legal, valuation and broker fees may also apply.
Consolidation does not solve ongoing overspending. If you borrow again after clearing your cards, you may have a larger mortgage and new unsecured debts at the same time.
Your mortgage choices may narrow. Debt consolidation is subject to lender-specific borrowing purposes, loan-to-value limits, credit criteria and affordability assessments.
Can you remortgage to consolidate debt with bad credit?
Possibly. A lender may consider recent missed payments, defaults, CCJs, mortgage arrears, the reasons for borrowing and evidence that the proposed repayments are sustainable. Acceptance is not guaranteed. Some lenders do not permit particular debt consolidation purposes, while others set different criteria or pricing.
An existing-lender product transfer may be an alternative if your immediate priority is to replace an expiring mortgage rate without increasing borrowing. Read our bad credit remortgage guide for more detail.
How much equity do you need?
Lenders calculate loan-to-value (LTV) by dividing the proposed mortgage balance by the property’s value.
For example, a £200,000 mortgage on a £300,000 property has an LTV of approximately 66.7%. A £200,000 mortgage on a £240,000 property has an LTV of approximately 83.3%.
A lower LTV may offer more mortgage options, but there is no single universal debt consolidation LTV limit. Some lenders apply tighter restrictions to additional borrowing for debt repayment. Your income, credit history, property and reason for borrowing matter as well.
What do lenders check before approving debt consolidation?
Lenders may ask for a full schedule of debts, including creditor names, outstanding balances, monthly repayments, interest rates and any settlement amounts. They will normally consider your income, regular spending, mortgage payment history, credit commitments and whether the additional borrowing is affordable.
Some lenders require evidence that the debts will be repaid or may arrange for repayment as a condition of the mortgage. Others may assess existing commitments differently if they are being cleared. The lender’s current criteria determine the process.
Self-employed borrowers may need accounts, tax calculations or SA302s and corresponding tax year overviews, depending on their business structure and the lender. See our self-employed remortgage guide.
When might consolidation be worth considering?
It may be worth exploring where existing repayments are putting genuine pressure on the household budget, there is sufficient equity, a sustainable mortgage is available and the long-term cost and risks have been compared with realistic alternatives.
Even then, a lower monthly payment does not automatically make consolidation suitable. The right decision may instead be a shorter mortgage term for the extra borrowing, an unsecured solution, a creditor arrangement or no new borrowing at all.
When might it be the wrong option?
Consolidation may be unsuitable where the debts are nearly repaid, a low-cost existing mortgage would be lost, the ERC is substantial, the borrower is likely to need more credit soon or the total cost is disproportionate to the monthly relief.
It may also be inappropriate where the household is already unable to afford essential commitments. In that situation, independent debt advice and discussions with existing creditors should come before securing more borrowing on the property.
What alternatives should you compare?
| Alternative | Potential advantage | Main consideration |
|---|---|---|
| Keep debts separate and repay faster | Avoids securing them on your home | Monthly commitments may remain high |
| Unsecured personal loan | Fixed repayment period without mortgage security | Rate, affordability and fees depend on eligibility |
| Balance transfer credit card | Promotional interest rate may reduce costs | Transfer fee, expiry date and ability to repay in time |
| Negotiate with creditors | May help when payments are unaffordable | Arrangements can affect your credit file |
| Existing-lender further advance | May avoid replacing your entire mortgage | Extra borrowing remains secured on your home |
| Second-charge mortgage | Can preserve the existing first-mortgage deal | Additional secured debt, separate rate, fees and repossession risk |
| Free debt advice | Independent help to assess the whole situation | Some solutions may affect credit or involve longer repayment plans |
For impartial help, see MoneyHelper’s debt consolidation guidance, StepChange and Citizens Advice.
Should you use a further advance or second-charge mortgage instead?
A further advance is additional borrowing from your existing mortgage lender. It may have a different rate or end date from your current mortgage product. You still need to meet the lender’s criteria, and the new borrowing is secured against your home.
A second-charge mortgage is a separate secured loan alongside your existing mortgage. It may avoid redeeming a competitive first mortgage or paying its ERC, but you must compare the combined cost of both loans, fees and risks. Neither route should be assumed cheaper than a full remortgage.
Read our early repayment charge guide and remortgage costs and fees guide.
Real Option Finance case study: Barclays further advance
Client outcome: £300 less in monthly repayments
The situation. Our clients had an existing secured loan and wanted to reduce their monthly borrowing repayments.
What happened. They took out a further advance with Barclays and used the additional mortgage borrowing to consolidate the secured loan. The further advance completed.
The result. Their monthly repayments reduced by £300, equivalent to £3,600 over 12 months if the repayment difference remains unchanged.
What this means and what it does not. This is a genuine, anonymised client example, not a typical or guaranteed outcome. A lower monthly repayment does not necessarily mean a lower total borrowing cost: extending repayment over a longer term can increase total interest. A further advance also increases borrowing secured on the home, which may be repossessed if mortgage repayments are not maintained.
How does the FCA regulate advice about debt consolidation?
Under FCA Handbook MCOB 4.7A.15, where the main purpose of a regulated mortgage is consolidating existing debts, advisers must consider relevant factors including the cost of extending the repayment period, whether it is appropriate to secure previously unsecured debt and whether an arrangement with creditors could be more appropriate for someone experiencing payment difficulties.
This is why the recommendation should examine more than the headline mortgage rate or monthly payment. The advice must reflect the customer’s circumstances and the suitability of the mortgage.
What fees apply to a debt consolidation remortgage?
Possible charges include a lender product fee, legal work, valuation, exit fee, early repayment charge and broker fee. Some products include standard legal or valuation services, while others do not.
Option Finance charges £499 in total for mortgage broking: £299 on application, refundable if the mortgage is declined, and £200 when the mortgage offer is issued. If you voluntarily withdraw after your application has been submitted, the £299 application fee is not refundable. The initial consultation is free. We explain the fee terms before proceeding.
The full comparison should include the interest cost and remaining balance over a consistent period, not simply subtract one monthly payment from another.
How to prepare for a debt consolidation mortgage review
Gather your current mortgage statement, mortgage deal end date, ERC details, recent income evidence, bank statements and a list of every debt you propose to repay. Include each balance, monthly payment, interest rate and any early settlement fee.
Also consider how you would manage the household budget after consolidation, whether the debts are likely to arise again and whether overpayments are affordable and permitted by the lender.
Frequently asked questions
Can I remortgage my house to pay off credit cards?
Potentially, if a lender accepts the borrowing purpose and you meet its affordability, credit and loan-to-value criteria. Credit card debts added to your mortgage become secured against your home and may cost more in interest over a longer term.
Is it a good idea to consolidate debt into a mortgage?
It can be if your current repayments are unaffordable, you have enough equity and the long-term cost has been compared with alternatives. It is often a poor idea if the debts are nearly repaid, would be cleared quickly anyway or are likely to build up again. Spreading £20,000 over 25 years instead of 5 can cost around £11,000 more in interest.
Will debt consolidation lower my monthly payments?
It can, especially if repayments are spread over a longer term. However, the total interest payable may increase and the debts become secured against your home.
Can I remortgage to consolidate debt with bad credit?
Some lenders consider applications involving missed payments, defaults or CCJs, but their criteria vary. A product transfer without extra borrowing may also be worth considering.
How much equity do I need to consolidate debts?
There is no universal equity requirement. Lenders assess the proposed loan-to-value ratio alongside affordability, credit history and the purpose of the extra borrowing.
Can I consolidate debt without changing my existing mortgage rate?
You may be able to consider a further advance or a second-charge mortgage without replacing your existing first mortgage. Both are secured borrowing and require a full cost and suitability comparison.
Do I have to pay an early repayment charge?
An ERC may apply if you redeem your current mortgage during a chargeable period. Check the exact redemption date and compare the cost with waiting or using another borrowing option.
What if I am already struggling to repay my debts?
Seek free independent debt advice before adding borrowing secured on your home. Contact your existing lenders or creditors to discuss support and repayment arrangements.
Does consolidating debt improve my credit score?
There is no guaranteed credit score improvement. New borrowing and credit checks may affect your file, while repayment history and how you use credit afterwards also matter.
Speak to Option Finance about your options
If you are considering consolidating debt, we can compare your existing mortgage, outstanding debts, suitable remortgage options and alternatives. We will explain the monthly payments, total costs, fees and risks before you decide whether to apply.
Use the enquiry form below to request an initial mortgage discussion. The initial consultation is free, and any subsequent broker fees will be disclosed before you proceed.
Review your remortgage options
Tell us about your plans and circumstances. Your initial consultation is free.
Review your remortgage options
Tell us about your plans and circumstances. Your initial consultation is free.
Written and reviewed by Davi Thakar
Director & Senior Mortgage Broker
CeMAP Qualified Mortgage and Protection Adviser
Davi founded Option Finance with a vision to deliver transparent mortgage advice from a wide panel of lenders. With over 10 years in financial services, he specialises in complex cases including adverse credit, self-employed borrowers with limited trading history, and large buy-to-let portfolios. He works directly on complex cases and explains each option clearly.
Meet Davi Thakar
