Consolidate your debts into one lower payment.

A debt consolidation remortgage works by replacing your existing mortgage with a new, larger one. The additional amount you borrow is used to pay off your outstanding debts, such as credit cards, personal loans and overdrafts. Once the remortgage completes, your solicitor distributes funds directly to your creditors, clearing those balances in full. You are then left with a single monthly mortgage payment instead of multiple payments to different lenders at varying interest rates and due dates.

To arrange a consolidation remortgage, you need sufficient equity in your property to cover both your existing mortgage balance and the total debts you wish to consolidate. For example, if your home is worth £300,000 and your current mortgage is £180,000, you have £120,000 in equity. If you want to consolidate £40,000 in debts, your new mortgage would be £220,000, giving you a loan-to-value ratio of around 73%. Most lenders will consider consolidation remortgages up to 85% or 90% LTV, though the best rates are typically available at 75% LTV or below.

The key advantage is that mortgage interest rates are significantly lower than the rates charged on credit cards and unsecured loans. A typical credit card charges 20% to 30% APR, while a mortgage rate might be between 4% and 6%. By moving your debts onto the mortgage rate, your combined monthly payment can drop substantially. However, it is essential to understand that you are converting unsecured debt into secured debt, which means your home is used as collateral for the full amount. Your broker will explain all of this clearly before you proceed.

A wide range of unsecured and consumer debts can be included in a consolidation remortgage. The most common types are credit card balances, personal loans, car finance agreements, store cards, catalogue debts, and overdrafts. Many homeowners carry a combination of these, and the cumulative monthly payments can be considerable. By consolidating them into your mortgage, you replace all of those individual commitments with one single payment. Some lenders will also consider including hire purchase agreements, buy now pay later balances, and in certain circumstances, payday loans or doorstep lending, though these can require a specialist lender.

There are some types of debt that typically cannot be consolidated into a mortgage. Student loans administered through the Student Loans Company are not eligible, as they are repaid through the tax system and cannot be settled early through a remortgage. Tax debts owed to HMRC, such as outstanding self-assessment liabilities, are also handled differently and most lenders will not include them. Court-ordered fines, child maintenance arrears, and any debts subject to a formal insolvency arrangement such as an active IVA or debt relief order will usually need to be addressed separately.

When your broker assesses your situation, they will review each debt individually to determine which ones can be included and which lenders are best placed to accommodate your specific mix of borrowing. Some lenders are more flexible than others regarding the types of debt they will consolidate, and a whole-of-market broker can identify those with the most accommodating criteria. It is worth gathering up-to-date statements for all your debts before your initial consultation, as this allows your broker to give you an accurate picture from the outset.

The primary advantage of a debt consolidation remortgage is a lower monthly outgoing. Because mortgage rates are considerably lower than the interest charged on credit cards and personal loans, the combined monthly cost typically falls by hundreds of pounds. Many homeowners also find that having a single payment each month is far easier to manage than juggling multiple creditors with different due dates and minimum payments. The psychological benefit of simplifying your finances should not be underestimated either. Reducing financial stress can have a meaningful impact on your wellbeing, your relationships, and your ability to plan ahead with confidence.

However, there are important risks to consider before proceeding. The most significant is that you are likely to pay more in total interest over the life of the loan. While the monthly rate on your mortgage is lower, your mortgage term may be 20 to 30 years, whereas a personal loan might have been repaid in three to five years. Spreading the debt over a much longer period means you pay interest for far longer. For example, £20,000 on a credit card repaid over five years at 22% APR costs a substantial amount in interest, but the same £20,000 added to a 25-year mortgage at 5% will also accumulate considerable interest over the full term. Your broker should always provide a clear comparison of total costs so you can make an informed decision.

The other critical risk is that you are converting unsecured debt into debt secured against your home. If you fail to keep up with your mortgage payments, your property could be repossessed. Credit card and loan debts, while serious, do not carry this risk. It is also vital that once your debts are cleared, you do not begin running up new balances on your credit cards and store accounts. Without discipline, consolidation can leave you in a worse position than before, with a larger mortgage and fresh unsecured debt on top. A responsible broker will discuss all of these factors with you openly and help you decide whether consolidation is genuinely the right course of action for your circumstances.

Debt consolidation through a remortgage tends to work best for homeowners who have built up meaningful equity in their property and are currently making high monthly repayments across multiple credit agreements. If you are spending several hundred pounds a month on credit card minimums, loan instalments, and overdraft charges, consolidation can free up a significant amount of disposable income. It is particularly effective when your debts carry high interest rates and you have a stable income that comfortably supports the new, larger mortgage payment. Homeowners who are organised enough to close or freeze their credit accounts after consolidation tend to benefit the most in the long run.

There are situations where consolidation may not be the most appropriate solution. If your total debts are relatively small, the costs associated with remortgaging, including arrangement fees, legal fees, and any early repayment charges on your current mortgage, may outweigh the savings. If you are already struggling to meet your existing mortgage payments, adding more debt to your mortgage is unlikely to improve your situation and could put your home at greater risk. In these cases, speaking to a free debt advice service such as StepChange, National Debtline, or Citizens Advice may be a more suitable first step. They can assess whether a debt management plan, individual voluntary arrangement, or other debt solution might be more appropriate.

A whole-of-market mortgage broker plays an essential role in helping you determine whether consolidation is right for you. They will carry out a full assessment of your financial circumstances, compare the total cost of consolidation against continuing with your current arrangements, and present the options clearly so you can make an informed choice. If consolidation is suitable, they will identify the best lender and product for your needs. If it is not, a good broker will tell you so honestly and point you in the right direction. There is no obligation to proceed, and the initial assessment is free, so it costs you nothing to find out where you stand.