Using a remortgage to pay off mortgage arrears in one go can sound like a clean solution, but it is often harder to arrange than it sounds, because the arrears themselves are exactly what makes a new lender cautious. A small number of specialist lenders may consider it, usually where there is enough equity to cover the arrears and where the arrears would be cleared as part of completion, but it is not something most mainstream lenders offer, and it is not the only option worth considering.
This page looks at how remortgaging to clear arrears might work, the risks involved in adding arrears to a larger loan, and the alternatives worth discussing with your current lender first. Free and confidential advice is available from MoneyHelper, StepChange and National Debtline if you want to talk through your options before deciding.
On this page
This page covers
- Credit issue
- Mortgage arrearsUsually stays on your credit file for 6 years from the date recorded.
- Reason for remortgaging
- Consolidating debtsSecuring debts on your home carries extra risk and needs careful thought.
In short
- A remortgage to clear arrears usually needs a specialist lender and enough equity to cover the amount owed.
- It turns short-term arrears into a larger, longer-term secured debt, which can cost more overall.
- Talking to your current lender about a payment arrangement is often more realistic and quicker to arrange.
- A regulated adviser must consider whether this route is actually appropriate for you.
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.
Can you remortgage specifically to clear your arrears?
In principle, yes, if a lender is willing to lend enough to cover both your existing mortgage balance and the arrears, with the arrears paid off as part of completion. In practice, this is one of the harder remortgage scenarios, because most lenders want to see arrears already resolved before they lend, not resolved by the loan itself. Where it is available, it tends to come from a smaller number of specialist lenders and usually needs a reasonable amount of equity in the property.
If you are behind right now and have not yet spoken to your current lender, that conversation is usually worth having first. See our page on currently in arrears for what your lender must consider under its own forbearance obligations.
What are the risks of clearing arrears this way?
| Arrangement with current lender | Remortgage to clear arrears | |
|---|---|---|
| What it involves | Catching up gradually alongside your usual payment | Borrowing enough to pay off the arrears in one go |
| Effect on your loan | Balance may rise a little if any amount is capitalised | Balance rises by the full arrears amount, plus any fees |
| Speed | Can often start straight away | Takes as long as a full mortgage application |
| Overall cost | Usually limited to the arrears and any capitalised interest | Interest on the arrears for the life of the new mortgage |
General illustration only. Costs and options depend on your own lender, equity and circumstances.
Adding arrears to a new, larger mortgage means paying interest on them for as long as the new mortgage runs, which can cost considerably more overall than clearing them directly. Your home remains at risk if the new, larger payment also becomes unaffordable.
What alternatives are worth considering first?
- Ask your current lender about a payment arrangement or capitalising the arrears, which our page on capitalised arrears explains
- Check whether a product transfer is available if you are not looking to borrow more
- Get free advice on a budget that could clear the arrears without new borrowing
- Ask whether a further advance from your current lender, rather than a full remortgage elsewhere, could work
A regulated mortgage adviser must consider whether consolidating debts, including arrears, into a mortgage is actually appropriate for your circumstances, rather than simply the most convenient option on paper.
What would a lender want to see if you go ahead?
Expect questions about exactly how much is owed, why the arrears happened, whether the cause has passed, and how much equity is in the property once the new loan is added. Evidence of stable income and a realistic budget for the new, larger payment matters as much as the arrears themselves.
If other debts are also part of the plan, our page on debt consolidation remortgage covers the wider risks of combining several debts into your mortgage, including the effect of a longer term on the total amount repaid.
What may affect a remortgage to clear arrears
| Factor | Why it matters |
|---|---|
| Amount of arrears to be cleared | A larger amount needs more equity and a bigger increase to the new loan. |
| Equity and loan to value after the increase | The new, larger balance still needs to sit within a lender’s acceptable loan to value. |
| Cause of the arrears | Lenders need reasonable confidence that whatever caused the arrears has passed. |
| Income and affordability | The new payment, on the larger balance, needs to be affordable under a standard stress test. |
| Other credit issues | Any other markers alongside the arrears usually narrow the range of lenders further. |
| Whether a payment arrangement was tried first | Being able to show what else was considered can help an adviser present the case. |
| Fees and costs of the new mortgage | Arrangement and legal fees add to the amount effectively being borrowed against the arrears. |
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.
- Recent mortgage statements showing the arrears and how they built up
- A short explanation of what caused the arrears
- Details of any arrangement already discussed with your current lender
- Proof of your income and regular outgoings
- An estimate of your property’s value
- Details of any other debts or credit issues you are considering including
Frequently asked questions
Is remortgaging to clear arrears a common option?
It is not common. Most lenders prefer arrears to already be resolved before lending, so this usually depends on finding a specialist lender and having enough equity. Speaking to your current lender about an arrangement is often more realistic.
Does clearing arrears through a remortgage cost more overall?
It often does, because the arrears become part of a larger mortgage balance and you pay interest on them for the life of the new loan, rather than clearing them directly with your current lender.
Will a lender ask why I did not arrange this with my current lender first?
Possibly, and it is a reasonable question to expect. Showing that you explored a payment arrangement or product transfer first can help an adviser present a clearer picture of your circumstances.
Can I include other debts as well as the arrears?
Some people look at this alongside consolidating other unsecured debts, but it increases the amount borrowed and secures those debts against your home. Our page on debt consolidation remortgages explains the risks in more detail.