The responsibility of juggling multiple debts can be overwhelming when added to the long list of life admin we must navigate daily. Add it to today’s challenging financial landscape and it’s easily possible for debts and financial struggles to mount up. You may have looked at your current debts in more ways than one, trying to understand how you can ease the strain for the short term, but a tool that often goes unnoticed is the debt-consolidation remortgage.
Granted, it is a tool that must be researched and utilised carefully, but it offers many people in the same financial turmoil a little short-term relief. If you’re coming up to a remortgage this year, speak to a specialist
mortgage broker in Manchester, like TaylorMade, to help you understand how this mortgage tool could work for you.
What is a Debt-Consolidation Remortgage?
Debt-consolidation remortgages involve refinancing your existing mortgage to consolidate multiple debts into a single, more manageable loan. Credit card balances, personal loans and other high-interest obligations can be added to your mortgage balance, which uses some of the equity in your home to pay off your debts. Using a debt-consolidation remortgage can potentially lower your monthly repayments, making them more manageable and spreading your debt over a longer period. It is possible, however, to end up paying more overall, as the life cycle of your debt is extended.
Is a Debt-Consolidation Remortgage a Way to Get Out of Debt?
Consolidating your debts into your mortgage is not a way of getting out of debt, instead, it should be looked at as a way of understanding your spending habits and making positive changes to help your future finances. Allowing your mortgage to swallow up your debts means that you have fewer payments exiting your bank account each month, with the added help of your home equity, but you are still paying back the money you owe.
Example of a Debt-Consolidation Remortgage:
| Personal Loan Debt |
Additional Borrowing Against Mortgage |
| £15,000 at 7% over 5 years |
£15,000 at 4% over 15 years |
| Monthly Payment - £297 |
Monthly Payment - £111 |
| Total Interest - £2,821 |
Total Interest - £4,971 |
Using a debt-consolidation remortgage allows a monthly saving of £186 per month, however, throughout the mortgage, additional interest adds up to £2,150.
Advantages and Disadvantages of a Debt-Consolidation Remortgage
As with all types of borrowing, there are benefits and risks that should be considered before entering a contract. These will be personal to each individual depending on where their financial strengths and weaknesses lie.
Advantages.
- Allows you to reset your financial situation and consolidate your monthly outgoings into one payment.
- A debt-consolidation remortgage usually has a lower interest rate than other, unsecured finance.
- A tool that can help you budget more effectively.
- Your credit rating will not be affected.
- Extending the repayment period can free up cash flow which can be put toward savings, investments, and other financial goals.
Disadvantages.
- Your mortgage payments increase, as your mortgage balance increases.
- It can cost more in interest, in the long term, as a mortgage term is longer than your average credit card or loan.
- Securing debts against your property puts your home at risk if payments are missed.
- It reduces the equity in your property.
Are There Alternatives Ways to Manage My Debt?
It is important to weigh up the pros and cons of a debt-consolidation remortgage and how this would impact you personally. Personal loans, credit cards and overdrafts may also be beneficial to you, depending on how you spend your money, so it is advisable to speak to a financial advisor about your financial situation, before making a decision.
Worried About Your Finances? Speak to an Independent Mortgage Advisor in Manchester
At Taylormade, we are experts in helping our customers consolidate their finances with a debt-consolidation remortgage. We are transparent about how they work and how they could benefit you and if we think this particular product may not work well for you, we won’t sell it to you.
We are an independent
mortgage advisor in Manchester, dedicated to helping our customers find the perfect mortgage for them. By remortgaging, you could consolidate your existing debts into one, lower monthly payment but it could also mean you pay more over the long term, which is why it is essential to discuss your options and individual circumstances with a professional, financial advisor before making a decision.
Our qualified
mortgage advisers can advise you on a range of options and can recommend the perfect solution based on your specific circumstances. We look at your monthly commitments and search for the right mortgage across the relevant markets. Get in touch today with our expert team of
mortgage advisors in Manchester and see how we can help you.
