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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.
It can be possible to remortgage to pay off debt, and for some people it makes monthly payments easier to manage. Whether it is a good idea for you depends on the size and cost of your debts, how secure your income is, how much equity you have and whether the debts are likely to build up again. There is no answer that suits everyone.
Two trade-offs matter most. Unsecured debts become secured on your home, so your home could be at risk if you cannot keep up repayments. And spreading short-term debts over a long mortgage term can mean paying more in total, even if the monthly cost falls. Free debt advice can help you compare this with the alternatives before you decide.
Questions to ask yourself before deciding
Our guide on whether you can remortgage to consolidate debt explains how the process works. This guide is about the decision itself. Work through these questions honestly, ideally with your statements in front of you.
About the debts
- What do I owe, to whom, and what does each debt cost me each month?
- Could I clear any of them within a year or two without borrowing more?
- What caused the debts, and has that changed?
About your home and mortgage
- How much equity do I have, and how would borrowing more change my loan to value?
- Is my current deal ending soon, or would I pay an early repayment charge to leave?
- Am I comfortable with these debts being tied to my home for the rest of the mortgage term?
About the future
- Could I keep up the larger mortgage if my income fell, or if my payments rose when a new deal ends?
- Would I close, or cut the limits on, the cards I clear?
- Could I afford to overpay the mortgage to bring the total cost down?
When it can make sense, and when it usually does not
| It may be worth exploring if… | It is usually worth pausing if… |
|---|---|
| Your income is steady and the new payments would be comfortably affordable | You are already struggling to pay for essentials such as bills, energy or food |
| The debts came from a one-off event that is now behind you | Your spending is still higher than your income |
| Your current deal is ending, so no early repayment charge applies | Leaving your deal now would mean a large early repayment charge |
| You have enough equity that the extra borrowing keeps your LTV manageable | The extra borrowing would push your LTV very high |
| You plan to close or limit the cards you clear | You expect to keep using the cards you clear |
| You have spoken to a free debt adviser about the alternatives | You are behind on your mortgage, or the debts feel unmanageable |
These are general signs, not rules. Lenders set their own criteria, and with adverse credit the choice of lenders may be narrower and rates are often higher than high-street rates. Our page on debt consolidation with bad credit covers that side.
What it could cost over a longer term
A lower monthly payment is not the same as a cheaper debt. When you move a debt into your mortgage, you pay interest on it for as long as it stays there, which may be the rest of the mortgage term.
The example below uses round numbers and is illustrative only, not a quote.
| Illustrative only, not a quote | Before consolidating | After consolidating |
|---|---|---|
| Debts | £15,000 across cards and a loan | Added to the mortgage |
| Monthly cost of those debts | £500 | Mortgage payment rises by £100 |
| Overall monthly saving | Not applicable | £400 |
| Time taken to repay the £15,000 | About 3 to 4 years | The remaining mortgage term, for example 20 years |
The £400 a month feels like a saving, but the £15,000 is now being repaid over 20 years instead of 3 or 4, so the total interest paid on it can be much higher. If your deal allows overpayments without a charge, paying some of that £400 back into the mortgage each month can bring the total down. Check the terms first, as overpayment allowances vary.
Fees for arranging the new mortgage, and any early repayment charge on your current deal, add to the cost too. Check your mortgage offer or annual statement for the charge and the date it ends.
The risk of securing unsecured debt on your home
With credit cards and personal loans, falling behind is serious, but the debt is not tied directly to your home. Once those debts are part of your mortgage, a missed payment is a missed mortgage payment. If arrears build up and cannot be resolved, your lender can ultimately take court action to repossess your home.
It can also narrow your options later. Arrangements such as a debt management plan or an IVA generally deal with unsecured debts, so debts moved into a mortgage usually fall outside them.
What happens after you consolidate?
The most common problem is not the mortgage but what happens next. Cards are cleared, the limits stay open, and new balances build up on top of a larger mortgage. You end up with more secured debt and the same unsecured debt again.
Before you commit, decide what you will do with each cleared account. Some people close cards or ask for lower limits. Closing accounts can affect your credit file in different ways, so think about which ones you actually need. A simple budget and a small emergency fund can reduce the need to borrow again. Our page on remortgaging to pay off credit card debt looks at card debt specifically.
Alternatives to remortgaging to pay off debt
- Second charge mortgage. A separate loan secured behind your first mortgage. It can avoid early repayment charges on your main deal, but it is still secured on your home.
- Balance transfer card. Keeps card debt unsecured and may reduce interest for a set period, but usually needs a reasonable credit history, and a transfer fee may apply.
- Talking to your creditors. Some creditors may agree reduced payments or a payment plan if you contact them early.
- Debt management plan (DMP). An informal plan to repay unsecured debts at an affordable rate, often set up free by debt charities. See remortgaging with a debt management plan.
- IVA or protected trust deed. Formal insolvency options for larger debts: an IVA in England, Wales and Northern Ireland, or a protected trust deed in Scotland. They have serious consequences, and many IVAs require homeowners to try to release equity later on, so get free advice first. See remortgaging after an IVA.
- A new deal with your current lender. If your deal is ending, a product transfer while you tackle the debts separately keeps them unsecured. Our guide to remortgaging with the same lender explains the checks involved.
What an adviser has to consider
Regulated mortgage advisers must consider whether consolidating debts into a mortgage is appropriate for you. Expect questions about what the debts are, why you want to consolidate, whether you could repay them another way and how you will avoid building them up again. An adviser may suggest leaving some debts out, such as a loan that is nearly paid off. That is part of their duty, not a barrier.
Free, impartial debt advice
If your debts feel unmanageable, speak to a free debt adviser before taking on secured borrowing. MoneyHelper, StepChange and National Debtline can look at your whole budget and every option, including those that do not involve borrowing more. GOV.UK also sets out options for paying off your debts.
If you are already behind on your mortgage, contact your lender early and read our page on remortgaging with mortgage arrears.
Frequently asked questions
Is it a good idea to remortgage to pay off debt?
It can be for some people and not for others. It may lower your monthly outgoings, but your debts become secured on your home and repaying them over a longer term can mean paying more in total. It is more likely to be worth exploring if your income is steady and you have a plan to avoid new debt. See our page on debt consolidation remortgages.
Can I remortgage to pay off debt with bad credit?
It can be possible. Some lenders consider debt consolidation for people with adverse credit, depending on the type and age of the entries, your equity and your affordability. The choice of lenders may be narrower and rates are often higher than high-street rates. See debt consolidation with bad credit and how LTV affects a bad credit remortgage.
Will paying off debts with a remortgage improve my credit file?
Clearing card and loan balances may help your credit file over time, particularly if you keep balances low afterwards. It does not remove past problems: missed payments, defaults and CCJs usually stay on your file for 6 years, even once paid. A remortgage application also usually involves a hard search. See remortgaging with defaults.
Can I remortgage to pay off debt if I am on a DMP or in an IVA?
Some lenders may consider it, depending on how long the arrangement has run, whether payments have been kept up and what is on your file. Clearing the debts changes the arrangement, so speak to your DMP provider or IVA supervisor first. Remortgaging during an IVA usually needs the supervisor's agreement. See remortgaging after an IVA and remortgaging with a debt management plan.
What if my current deal has not ended yet?
Leaving early can trigger an early repayment charge, so check your mortgage offer or annual statement for the amount and the end date. Many lenders let you arrange a new deal a few months ahead. If the charge is large, a further advance from your current lender or a second charge mortgage can be alternatives, as both leave your main mortgage in place.