How can I raise funds to consolidate debts

Answered on 13 February 2019

I own my home and want to raise funds to consolidate debts. What type of mortgage will I need and what options are available to me?

Consolidating Debt

It’s always worth looking through lender's affordability calculators, which you can find on their website. Raising funds on your property will depend on you meeting the lenders criteria, particularly the credit score and also your property being acceptable security for a mortgage.

You would have a choice of variable or fixed rate with a new lender and would qualify for a free valuation and free legal package if you wished. However, before you explore this route it is suggested that you approach your existing lender to see what choices they would offer you in conjunction with additional borrowing to repay your debts.

Remortgaging As An Option

If your existing lender is not happy to help or they don't have an attractive selection of products to choose from you can consider remortgaging the property. They would lend you the money required to repay additional funds required to pay off your other debts.  A few lenders will not let you borrow for debt consolidation but I do not think this will restrict your choice and you should be able to find a good combination of rate, fees and early repayment charges (ERC).

You will also need to consider how you want to pay back the capital you will borrow. If you have investments that will provide sufficient funds to clear the mortgage debt you could consider an interest only mortgage, this would help keep the monthly payments down.

If you doesn't then you would probably be better taking a capital repayment mortgage where the capital is repaid month by month over the term of the mortgage. Whichever method you choose, you needs to be aware that although the initial monthly cost of repaying your debt is decreased it is very possible that the total cost, capital plus interest plus charges could be a lot higher if you decide to consolidate the debts in to one mortgage.

You would benefit from speaking to one of our independent mortgage advisers. Please call on 0330 433 2927 and they will be able to look at what you have been offered by your lender and be able to see if there was a better deal available elsewhere.

Ask The Mortgage Experts answers are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We recommend you seek professional advice with regard to any of these topics where appropriate.