Can I Remortgage To Pay Off Debt In The UK?

Many UK homeowners struggle with unsecured debts from loans, credit cards and expensive overdrafts. 

Research suggests the average UK household has over £5,500 of unsecured personal loans, £2,500 of outstanding credit balances and over £9,000 of student debt. The average total UK household debt excluding mortgages currently stands at around £17k.

Naturally, if you have debts and own your own home, some form of equity release is a good way to pay off more expensive unsecured debts (which typically have higher interest rates than secured finance).

Remortgaging to pay off accumulated debts is a common approach, but there are other approaches, too. For example, a secured debt consolidation loan is flexible, faster, and more cost-effective than a remortgage, and it leaves your existing mortgage arrangement intact—great if you’re on a good deal!

At ABC Finance, we’re specialists in helping our clients find the best solutions for debt consolidation, from remortgaging to secured debt consolidation loans.

We’re totally committed to putting our clients’ needs above our own, so in this guide, we’re going to cover everything you need to know!

What To Know About Remortgaging To Pay Off Debt

Remortgaging to pay off debt means refinancing your existing mortgage to increase the outstanding loan. The extra funds are used to pay off your unsecured debts.

Usually, this kind of remortgage means replacing your existing mortgage deal with a new offer.

Why do homeowners look at remortgaging to repay debt?

Homeowners consider remortgaging to repay debt for three reasons:

• It’s typically cheaper than taking another credit card or a personal loan. 
• It simplifies different payments into one single monthly payment, which can be easier to administer and keep track of.
• It potentially lowers total monthly outgoings if the monthly remortgage sum is less than the unsecured debt repayments.

What are the risks of remortgaging?

Remortgaging to pay off debt does come with a number of risks, particularly in terms of higher costs. For example:

• If you remortgage, you will likely need to pay early repayment charges
• You will probably have a higher total interest cost over time
• There may be a potential loss of a more competitive rate
• The loan term itself is likely to increase, along with the total cost.
• There is a risk of losing your home entirely if you cannot meet the repayments.

How to pay off debt without remortgaging

You don’t need to remortgage to repay debt. Many people assume that remortgaging is the most logical option, but it may not be.

A secured debt consolidation loan, sometimes also called a second charge loan or homeowner loan, is a good alternative for many people, but these products are less widely known and typically only available through specialist lenders and the broker market. 

With a secured debt consolidation loan, you use your home as security as before, but you don’t replace or affect your existing mortgage in any way. 

This is good news for many homeowners who tend to be on attractive deals that they don’t want to change.

Instead, the homeowner loan is used to repay your various credit cards and unsecured personal loans (which are typically expensive). Then you have one payment alongside your mortgage to meet each month.

The secured loan is more affordable as it’s secured against your property. It’s also faster and cheaper than a remortgage.

There is usually less paperwork, too, and your broker can handle what administration is required for speed, accuracy, and efficiency. 

Keep reading – Debt consolidation loan brokers or try our debt consolidation loan calculator.

What are the features of a secured debt consolidation loan?

A secured debt consolidation loan is a second charge loan placed against your property. It allows you to keep your existing mortgage in place and untouched, so you can continue to benefit from the existing rate and avoid any early repayment fees.

The homeowner loan is flexible. It can be taken out for terms of up to thirty years, and at a lower interest rate, typically, than with an unsecured loan.

It’s also accessible, as this type of second charge loan tends to be available even if your credit record isn’t perfect, or if you have non-traditional income streams. 

A broker such as ABC Finance can assess your needs and financial position to help you get the best possible deals from lenders who are well-positioned to approve your application. 

Secured debt consolidation loans also tend to have no early repayment charges, and they have a relatively simple application process.

In summary, the benefits of these second-charge loans are:

• Leaves the mortgage intact
• Less expensive than unsecured finance
• Quick and easy to apply for
• Available to people with less-than-perfect credit.

Who can apply for a secured debt consolidation loan?

Secured debt consolidation loans are suitable for homeowners who want to consolidate their debts into one single, affordable monthly payment.

These second charge loans are ideal if you:

• Want to keep an existing mortgage deal on your home
• Want to avoid early repayment penalties
• Have tried to apply for an unsecured loan but have been declined
• Need to borrow more than an unsecured loan will allow (so long as you have sufficient equity in your home).
• Have multiple debts that you want to manage in a single, affordable monthly payment more easily.

ABC Finance can help you assess your options and find the best approach for your needs, all while keeping your existing mortgage intact and untouched.

Read more – Advantages of debt consolidation or Debt consolidation loan rates.

How to consolidate debts with a second charge loan

The easiest way to consolidate debts with a second charge loan is to use an FCA-accredited broker to manage the process. 

Whether you go direct or use a broker for the best deal, these are the steps you’ll take.

Assess your position

Calculate the total of your unsecured debts, which could be in the form of unsecured or personal loans, credit cards and store cards. Know how much you want to borrow to repay these debts in full.

Get advice

An FCA-accredited broker like ABC Finance can review your unique needs and financial position to see how much you can borrow based on your affordability, credit rating, and property equity.

Your broker will then know which lenders to approach based on your unique profile and the offers currently in the market.

Compare deals

The second-charge loans market is specialised; most lenders only go through the broker network. Customers generally cannot access all secured debt consolidation loans directly through the open market.

If you use a broker, they will find the best deals and explain the offers, with repayment terms, interest rates, features and total repayment amounts.

Apply for your chosen loan

Your debt consolidation loan broker will submit your application to ensure accuracy and the fastest turnaround time.

They will check your ID and provide documentation that the lender requires to evidence your income, existing mortgage arrangements, and equity in your home. 

The lender may perform a desktop valuation to verify the available equity in your home, especially if you wish to borrow a sizeable secured debt consolidation loan.

This will ensure that your equity can easily meet your first-charge mortgage and second-charge loan.

Repay your unsecured debts

When your secured debt consolidation loan is approved, you’ll use it to repay your debts. You will then have one single monthly payment, in addition to your regular monthly mortgage payment, and far less financial stress. 

It’s essential that you don’t build up further unsecured debt once your homeowner loan is in place. 

How ABC Finance can help

ABC Finance is a multi-award-winning, family-run business with over 20 years of experience helping customers with financial products such as debt consolidation and second-charge loans.

We offer whole-of-market access and compare top lenders to get the best rates, negotiating on behalf of our customers to get the best possible rates. We also charge fees that are typically half the industry standard despite offering a premium service.

We never pressure our customers and focus on offering trusted, regulated advice. We are voluntary members of FIBA, which reflects our commitment to the highest standards of client care.

Our team is friendly, fast, and transparent, and we’re confident that we can help you regain control of your finances, whether you’re looking to cut your monthly payments or free up capital for any purpose.

Contact us today for a no-obligation chat and to find out if a secured debt consolidation loan is right for you.

FAQs About Secured debt consolidation loans

Secured debt consolidation loans, or homeowner loans, are specialist products that are less well known in the consumer market. Here are some common questions.

Is it risky to secure a loan against my home?

Secured borrowing always carries a risk because if you default on your loan repayments, your lender can repossess your home. However, taking out a second-charge loan with quality advice from a trusted broker like ABC Finance can be a smart way to manage your debts.

Will a homeowner loan affect my credit score?

It can do, but potentially in a positive way, if you use your secured debt consolidation loan to repay your other outstanding unsecured debts in full and manage your new repayments carefully and thoroughly. 

Can I get a secured second charge loan if I have bad credit?

Yes. Many lenders will still offer secured debt consolidation loans to customers with adverse credit. By working with a broker such as ABC Finance, you can access the broadest panel of trusted, quality lenders with the best possible outcomes.

How long does it take to get a secured debt consolidation loan?

It’s often much quicker than a full remortgage, and some homeowner loans can be completed in as little as two to three weeks.