Ever thought about paying off all your debts through your mortgage?
This may sound like a simple idea, but you need to know what it will cost you in total. That’s because as mortgages are paid back over a long time, you can end up paying back far more than you think.
Think carefully before securing other debts against your home.
In this article, we’ll look at remortgaging to consolidate debts and what other options you should consider first.
The Differences Between Types of Debt
A mortgage is a secured debt. This means your home is at risk if you fail to make repayments. So your lender has a right to repossess your home to get their money back if you do not repay your mortgage.
Personal loans and credit cards are unsecured debt, so these lenders don’t have the same rights to recover unpaid debts by taking your property.
Each type of debt has different interest rates and durations. Typically mortgages are for longer periods and with lower interest rates than personal loans.
As a result, if you add your other debts to your mortgage you’re likely to pay a lower interest rate. However, you’ll be paying this for the whole length of your mortgage. So the total amount you pay is typically much higher.
Other Options to Deal with Your Debts
Your first step should be to prioritise your debts. This means deciding which ones you need to pay off first. Some debts are more serious than others so these should come first.
Speak to the companies and organisations you owe money to. Many of them will want to help you. This may include agreeing to new amounts and dates for what you’ll repay and when.
Also, if you are struggling with money get professional advice on how to manage your debts. Organisations like StepChange offer expert debt advice and money guidance.
The Impact of Your Credit History
Mortgage lenders look at your credit history when making a lending decision.
So if you miss or are late with your payments for credit cards or loans, it impacts your credit rating. This in turn could impact your ability to remortgage. Remortgaging is possible but take advice from a professional.
Professional Advice About Remortgaging
It’s best to take professional advice from a mortgage broker as they can help you understand your remortgage options and give you advice on your personal situation if you have large debts. They’ll also search to find suitable mortgages if you decide to remortgage.
Please Note: As a mortgage is secured against your home, it may be repossessed if you do not keep up the mortgage repayments.
If you would like to speak to us about remortgaging or reviewing your existing mortgage, please email us firstname.lastname@example.org.