Lenders may look hard at the debts you want to clear, because they are often the source of the problems on your file. Some may require particular debts, such as unsatisfied CCJs or defaulted accounts, to be repaid on completion. Rates for adverse credit are often higher, and lower LTV limits can cap how much you can release. Nothing is guaranteed, and for some people another option will fit better.
For the basics, including the risk of securing debt on your home, start with our main page on debt consolidation remortgages. If your debts are mostly on cards, see remortgaging with credit card debt.
On this page
This page covers
- Reason for remortgaging
- Consolidating debtsSecuring debts on your home carries extra risk and needs careful thought.
In short
- Some lenders may require unsatisfied CCJs, defaults or arrears to be cleared on completion.
- Higher rates for adverse credit can shrink, or wipe out, the saving from consolidating.
- Lower LTV limits can cap how much equity you can release to clear debts.
- An active IVA needs your supervisor’s agreement, and free debt advice may point to a better route.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
How does bad credit change a debt consolidation remortgage?
With a clean credit file, consolidation is mostly about equity and affordability. With adverse credit, a lender is also asking why the debts built up and whether the problems are behind you. The debts you want to clear are often the same accounts that show missed payments or defaults, so they get close attention.
That tends to mean fewer lenders and more conditions on any offer. Our guide to what adverse credit means explains how lenders group different issues.
Which debts may a lender require you to clear?
A lender may make it a condition that certain debts are repaid when the remortgage completes, sometimes by paying the creditors directly. Which debts, if any, varies by lender.
| Type of debt | What some lenders may require |
|---|---|
| Unsatisfied CCJs | Payment in full, so the judgment is marked satisfied |
| Defaulted accounts | Settlement of some or all defaults |
| Arrears on cards or loans | Clearing the arrears, or the whole account |
| Secured loan arrears | Repaying the second charge in full |
Illustrative examples only, not the criteria of any particular lender. Some lenders may not require any debts to be cleared.
Clearing a default or CCJ marks it as settled or satisfied, which many lenders view more kindly, but it still stays on your file for 6 years from the default or judgment date. See remortgaging with satisfied defaults.
Can you consolidate existing arrears or defaults?
Sometimes. Clearing defaulted cards or loans is a common reason to look at consolidation, and some lenders may consider it. How recent the defaults are, how many there are and how steady your payments have been since usually shape the answer.
Mortgage arrears are harder, because they sit on the loan you want to replace and lenders treat missed mortgage payments seriously. Some specialist lenders may consider cleared or older arrears, but current arrears often limit options a great deal. If you are behind now, speak to your lender first and see remortgaging with mortgage arrears.
Some creditors may accept less than the full balance as a full and final settlement. The account is then usually recorded as partially settled. Get any agreement in writing.
When higher rates and LTV limits stop the numbers adding up
Rates for adverse credit are often higher than high-street rates, and the higher rate applies to your whole mortgage, not just the consolidated part. On a large balance, that can cancel out the saving. Lenders also often cap borrowing at a lower LTV for adverse credit, so you may not be able to release enough to clear everything.
| Illustrative figures | Amount |
|---|---|
| Property value | £250,000 |
| Current mortgage | £160,000 (64% LTV) |
| New loan needed to clear £30,000 of debts | £190,000 (76% LTV) |
| Maximum loan if capped at 70% LTV | £175,000 |
| Debts left uncleared | £15,000 |
Illustrative only. The 70% cap is hypothetical, not a real lender limit.
Clearing only some debts can leave you juggling payments with a bigger mortgage. Test your own figures with our bad credit remortgage calculator, and see remortgaging with little equity if equity is tight.
DMPs, IVAs and when another option may be better
On a DMP? Using a remortgage to clear it swaps an informal, flexible arrangement for debt secured on your home. If the plan is close to finishing, waiting may cost less. See remortgaging with a debt management plan.
In an IVA? You cannot simply consolidate its debts through a remortgage. Any remortgage usually needs your supervisor’s agreement, and money released normally goes into the arrangement. See remortgaging to pay off an IVA.
- Free debt advice from StepChange, MoneyHelper or National Debtline, including options that leave your home out of it.
- A debt management plan, which keeps debts unsecured, although creditors do not have to agree to it.
- A second charge mortgage, which leaves your current deal in place but still secures the debt on your home.
What may shape a consolidation remortgage with adverse credit
| Factor | Why it matters |
|---|---|
| Age of the adverse credit | Recent defaults, CCJs or missed payments tend to narrow options more than older, settled ones. |
| Status of each debt | Whether each debt is up to date, in arrears, defaulted or subject to a judgment. |
| Mortgage payment history | Missed mortgage payments usually weigh more heavily than other credit problems. |
| Total amount to consolidate | The more you clear, the higher the LTV and the harder the affordability test. |
| Loan to value | Lower LTV limits for adverse credit can cap how much equity can be released. |
| Rate on the whole mortgage | A higher rate applies to your entire balance, which affects whether you save anything. |
| Formal or informal plans | An active DMP or IVA changes who needs to agree and how lenders view the application. |
| Income and affordability | Depending on the lender, debts being cleared may or may not be left out of your outgoings. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- A list of every debt, with its balance, monthly payment and current status
- Settlement figures for any debts you want cleared on completion
- Your credit reports from Experian, Equifax and TransUnion
- Details of any DMP or IVA, including your provider or supervisor
- Your mortgage balance, deal end date and any early repayment charges
- Proof of income and a realistic monthly budget
Frequently asked questions
Can I consolidate debts that have been sold to a debt collector?
It may be possible. The debt collector becomes the creditor, so you would need a settlement figure from it rather than the original lender. The default date should not change when a debt is sold, as our defaults page explains.
Is it worth consolidating if the new mortgage rate is higher than my current one?
It may still reduce your monthly outgoings, but it can cost more overall, because the higher rate applies to your whole balance and the debts run over a longer term. Compare total costs, including fees and early repayment charges.
Will clearing my debts remove the defaults from my credit file?
No. Defaults stay for 6 years from the default date, and CCJs for 6 years from the judgment date, whether or not they are paid. Clearing them changes how they are marked, which many lenders see more positively, but not the dates.
Can I consolidate debts with bad credit if I am self-employed?
It can be possible, but lenders will assess both your credit history and how your income is evidenced, commonly through accounts or tax calculations. See self-employed bad credit remortgages.