Remortgage to consolidate debts

If you’re a homeowner juggling multiple unsecured debts, such as credit cards, personal loans or overdrafts, remortgaging can be a way to simplify your finances. Instead of paying several creditors at different interest rates and on different dates, you may be able to switch your mortgage to a new deal that includes extra borrowing to clear those debts.

This guide explains how remortgage debt consolidation works, the main pros and cons, and the key factors that can affect whether it’s a sensible option.

Related guides:

• Secured debt consolidation loans, if you're considering a separate secured loan alongside your existing mortgage instead.
• Further advance mortgages, for additional borrowing from your current lender.
• Remortgaging to release funds, for other reasons to borrow against your home.
• Secured loans and second charge mortgages, for keeping your existing mortgage in place.

What is remortgaging to consolidate debts?

Remortgaging to consolidate debts typically means:

• You switch your current mortgage deal (or refinance) to a new mortgage.
• You borrow additional funds as part of the new mortgage.
• The extra borrowing is used to pay off unsecured debts, leaving you with one monthly mortgage payment.

In many cases, the debts you’re consolidating are unsecured, which means they’re not normally tied to your home. When you consolidate them into a mortgage, they effectively become secured against the property.

Common debts people consolidate

While lenders’ requirements vary, the types of debts often considered include:

• Credit cards
• Personal loans
• Overdrafts
• Car finance
• Store cards
• Some other unsecured borrowing (subject to lender rules)

Lenders may ask for evidence of the debts and how the funds will be used.

Which debts are often considered for consolidation?

Lenders and brokers will look at the nature of the debts and how they affect affordability and credit assessment. While requirements vary, the following themes are commonly relevant.

Debts that may be more suitable:

• Larger credit card balances where you’re paying mostly interest and not reducing the principal quickly.
• Loans used for home improvements (because they’re often viewed differently to consumer borrowing).
• Unsecured borrowing with meaningful balances where consolidation can materially change monthly affordability.

Debts that may be less suitable:

• Very small balances: consolidating a small amount over a long mortgage term can be inefficient.
• Short-term loans with little time remaining: by the time the remortgage completes, the balance may have reduced, making consolidation less worthwhile.
• Some forms of consumer finance: certain products can be viewed less favourably, particularly where the repayment period can extend significantly.

Note: eligibility and what can be included varies by lender and your circumstances. A broker can help you understand what’s likely to be acceptable.

Full remortgage or second charge?

There are two common ways the consolidation can be set up.

Full remortgage

A full remortgage replaces your existing mortgage entirely. The new mortgage amount covers:

• the balance on your current mortgage, plus
• the amount needed to clear your unsecured debts

Once complete, you have one mortgage and one monthly payment. If your mortgage is approaching renewal, it may be possible to consolidate as part of the remortgage process. This can allow the consolidated amount to be added into the new mortgage structure.

Second charge

A second charge is an additional secured loan placed on your property while your original mortgage remains in place.

With a second charge:

• your existing mortgage continues as normal
• a separate secured loan is added to repay the unsecured debts

This usually means two monthly repayments: one for your original mortgage and one for the second charge. If your remortgage is not due for some time, you may face early repayment charges. In those cases, a second charge (sometimes referred to as a secured loan) can be used to clear the unsecured debts.

Later, when your main mortgage is due, you can potentially remortgage again to pay off the second charge and return to one consolidated payment.

Second charge borrowing often has different pricing to a first mortgage, so the total cost and affordability should be assessed carefully.

Which is better?

The “best” structure depends on your circumstances, including the amount you need to borrow, how much equity you have, and how your existing mortgage is set up. The key point is that lenders will consider the total secured borrowing on the property when assessing LTV and risk.

Potential benefits of consolidating unsecured debts into a mortgage

• Simplified repayments: One repayment to one lender can make budgeting easier and reduce the risk of missing payments across multiple accounts.
• Potentially lower interest than unsecured borrowing: Mortgage interest rates are often lower than the rates charged on credit cards and many personal loans. If the mortgage rate you secure is lower than what you’re currently paying, consolidation may reduce the cost of borrowing.
• Improved cash flow: Even when the total amount repaid doesn’t always fall, consolidating can sometimes reduce monthly outgoings, particularly if you’re able to structure the new mortgage repayments to suit your budget.
• Predictable payments: Depending on the deal you choose, you may be able to benefit from fixed-rate options, which can help with planning.
• Credit profile may improve over time: If consolidation reduces credit utilisation and you keep accounts up to date, your credit profile may improve gradually. A new mortgage application can still create short-term credit file changes, so it’s important to consider timing.

Opportunity to review your mortgage terms

Remortgaging isn’t only about paying off debts. It can also be a chance to review your mortgage type, interest rate structure, and term.

For example, you may be able to:

• switch to a different interest rate type
• change the length of the mortgage term
• adjust the repayment profile (subject to lender rules)

Key risks and drawbacks to consider

• Unsecured debt becomes secured: The biggest trade-off is that debts that were previously unsecured may become secured against your home. If you struggle to meet mortgage repayments, the consequences can be more serious than with unsecured creditors.
• Extending the term can increase total interest: To reduce monthly payments, some borrowers extend the mortgage term. That can lower the monthly figure but may increase the total interest paid over the life of the loan.
• Early repayment charges may apply: If you’re leaving a current fixed deal, early repayment charges (ERCs) can affect the overall cost of remortgaging.
• LTV and borrowing limits can restrict options: Your available borrowing for consolidation depends on the loan-to-value (LTV) your lender will accept. A higher LTV may limit lender choice and can affect pricing.
• Risk of rebuilding debt: Clearing credit cards and loans can remove immediate pressure, but it doesn’t automatically change spending habits. Without a plan, it’s possible to accumulate new unsecured debt again. If consolidation frees up monthly budget but spending habits remain unchanged, the benefits can quickly disappear.
• Affordability is still assessed: Consolidation doesn’t remove the need to demonstrate affordability. Lenders will consider income, existing commitments, and the proposed mortgage payments.

When consolidation remortgaging may be risky or less suitable

It may be less suitable if:

• You’re relying on consolidation to fix affordability but your income/outgoings don’t actually support the new mortgage
• You’re likely to continue using credit facilities after consolidation
• The consolidation amount is large relative to your property value, leaving limited options
• The long-term interest cost is significantly higher and you haven’t accounted for it

How equity and LTV can affect your ability to consolidate

Most remortgage options depend on how much equity you have in the property. Lenders work with an LTV calculation (loan amount compared with property value). If you want to borrow more to clear debts, your LTV may increase.

As a broad illustration:

• Property value: £250,000
• Current mortgage balance: £150,000
• Equity available: £100,000

If your lender’s maximum LTV allows additional borrowing, you may be able to release part of that equity to repay unsecured debts, subject to affordability, credit checks and the lender’s rules.

Because each lender’s approach differs, the exact amount you can borrow for consolidation may be higher or lower than an estimate.

Example (illustrative): £120,000 property at 90% LTV

If a property is worth £120,000 and the maximum borrowing is 90% LTV, the maximum mortgage amount would be £108,000.

If your current mortgage balance is £58,000 and your unsecured debts are £31,000, a full remortgage would require £89,000 total borrowing. That sits within the £108,000 limit, so the consolidation may be feasible from an LTV perspective.

If the unsecured debts were higher, the total borrowing could exceed the maximum LTV, making the full amount harder to raise.

Note: maximum LTVs vary by lender and product, and not all lenders will offer the same terms for debt consolidation.

How to think about “savings” properly

A practical way to evaluate a debt consolidation remortgage is to compare:

1. Your current total monthly outgoings for mortgage and unsecured debts
2. The proposed new monthly mortgage payment
3. The overall amount repaid over the full mortgage term (not just the monthly figure)
4. Fees and charges from remortgaging

If the monthly payment improves but the total cost over time increases substantially, the decision may still be reasonable for cashflow reasons, but it should be made with eyes open.

This approach supports a decision based on outcomes, not just headline rates.

When remortgaging to consolidate debts may be a good fit

It may suit homeowners who:

• Have enough equity to support additional borrowing.
• Are able to meet the new mortgage repayments comfortably.
• Are consolidating debts with high interest costs.
• Understand how the new term and total cost of borrowing could change.
• Have a realistic plan to avoid accumulating new unsecured debt.

Do’s and don’ts for remortgaging to consolidate

Do

• Check early repayment charges on your current mortgage before planning a move
• List all debts clearly, including balances, interest rates and minimum payments
• Compare like-for-like: monthly payment, total repayable amount, and the mortgage term
• Consider whether you can afford the mortgage comfortably even if rates or budgets change

Don’t

• Assume the monthly payment will always be lower. It depends on the new rate and term
• Ignore the total cost over the full mortgage period
• Consolidate without a plan for how you’ll manage spending going forward (otherwise debts can build up again)

How to maximise your chances of approval

While every lender has its own criteria, there are practical steps that can help strengthen an application when the goal is to clear debt:

• Avoid taking on new credit before the remortgage application.
• Keep debt repayments up to date and address any arrears.
• Be prepared with accurate documentation for income, outgoings, and the debts you want to clear.
• Use realistic figures for how much you want to borrow and what you can afford.
• Consider the overall plan, not just the debt payoff. Your mortgage term, interest rate type, and monthly payment matter.

Debt consolidation remortgages and bad credit

Adverse credit does not automatically prevent a remortgage, but it can affect outcomes such as:

• which lenders may consider your application
• the overall cost of borrowing
• the amount you may be able to borrow

Where credit issues exist, affordability and equity remain central. The best approach is to ensure the remortgage plan is realistic based on your full circumstances.

Reviewing your credit report can help you understand what lenders may see.

If a debt consolidation remortgage has been declined, an adviser can help you explore what may still be possible.

Shared ownership and other property types

If you’re on shared ownership, the remortgage process can be more complex. Lender availability and the structure of the arrangement can affect what’s possible.

Property type and ownership structure can therefore influence consolidation options, so the plan needs to be assessed with the correct property details.

Alternatives to consider

Remortgaging isn’t the only way to tackle unsecured debt. Depending on your circumstances, alternatives can include:

• Homeowner loans (a separate secured loan, rather than increasing your mortgage).
• Debt management plans (DMPs) to repay creditors under an agreed structure.
• Individual Voluntary Arrangement (IVA) where appropriate.
• Negotiating directly with creditors to explore repayment options.
• Budgeting and repayment restructuring to reduce pressure without additional borrowing.

Considering alternatives alongside remortgaging can help you choose the option that best balances monthly affordability and long-term cost.

Factors lenders may look at

While requirements vary, lenders commonly consider:

• Affordability based on income and expenditure.
• The amount of equity available and the resulting LTV.
• The type and level of unsecured debt being consolidated.
• Your credit history and conduct.
• Whether the debts can be evidenced and repaid as planned.
• The impact of any change in mortgage term or repayment structure.

Questions to consider before committing

A debt consolidation remortgage is a long-term decision. It can help to pressure-test the plan against a few key questions:

• Will consolidation reduce monthly pressure without stretching the repayment period too far?
• Are the specific debts you want to clear likely to be eligible for consolidation under lender rules?
• What remortgaging costs or charges could apply, including any early repayment charges?
• If your circumstances change, how secure is your ability to keep up with mortgage repayments?
• Does the overall plan support your longer-term goals, or does it simply move the problem?

Remortgage to consolidate debts FAQs

Important: Your home may be repossessed if you do not keep up repayments on your mortgage.