Debt Consolidation

Posted on 4 February 2011 by June Ruskin

My son aged 40 owns a house with a value of £150,000-£160,000 with no mortgage. He wants to raise £40,000 to consolidate debts. What type of mortgage should he apply for on a shortish repayment period e.g 10 years.


The type of mortgage your son requires will depend on his attitude towards risk. If he wants to know that his payments won't fluctuate and be able to plan a budget for the future then a Fixed rate mortgage is likely to be more suitable than a variable rate. The monthly payments are likely to be higher, certainly in the short term but he would be protected from any future interest rate rises. If he is willing to face the risk of monthly payments increasing in the future then a variable rate that tracks the Bank of England base rate will probably provide the lowest monthly payments to begin with.

He will also need to consider how he wants to pay back the capital he borrows. If he has investments that will provide sufficient funds to clear the mortgage debt he could consider an interest only mortgage, this would help keep the monthly payments down. If he doesn't then he 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 he chooses he needs to be aware that although the initial monthly cost of repaying his debt is decreased it is very possible that the total cost, capital plus interest plus charges could be a lot higher if he decides to consolidate the debts in to one mortgage over a longer term.

It is my belief that he would benefit by speaking to one of our independent mortgage advisers. If he can call on 0344 346 3672 and tell the adviser the date of your question, they will be able to look at the situation and take it from there.


Answers provided in response to Ask the experts 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.

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