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Debt Consolidation and My Mortgage

Written by: Alex Walker Content Assistant, Asda Money 16 Nov 2020

Our mortgages are one of the biggest and most important loans we’ll take out over our lifetimes. They provide us with something to work towards and they help us afford our homes.

But if you’ve hit a run of bad luck, you’ve taken out a number of loans, and you’re finding yourself unable to pay off those loans and to manage financially, then you may feel tempted to go down the route of obtaining debt consolidation mortgage – this solution might seem like it has a lot to offer, but it also comes with a range of risks and issues of its own which may cost you more money, and even your home, further down the line.

In this blog, we’re going to explore what it means to consolidate your debt, how it works with your mortgage and what other options you might also want to consider.

What is debt consolidation?


Debt consolidation is a method of combining all of your debts into one main debt that you pay off. The process sees you take out a loan which covers the total amount of your debts – that loan has one interest rate and you’ll be making all of your repayments at the same amount each month, instead of having to juggle multiple payments to different lenders.

While debt consolidation can sometimes seem like a good idea to bring all of your debt payments under one banner with a better interest rate, it can also leave you with larger repayments every month for a longer period of time.

For this reason, it’s best to carefully consider your options before going ahead with debt consolidation. For more information about the potential pitfalls and for free general advice about debt management, learn more with the debt charity StepChange.

Can you consolidate debt into a mortgage?


Yes, you can consolidate your debt under your mortgage, which would mean that as you pay off your mortgage each month, you would also be paying off your collective debts.

How does a debt consolidation mortgage work? To consolidate your debt into your mortgage, you would need to re-mortgage. The re-mortgaging process would in theory, free up a sum of money from the equity you own in your home which you could use to pay off existing debt. That debt would be consolidated into your mortgage payments which would be higher and could last longer.

Is it better to consolidate debt into mortgage?


People are attracted to consolidating their debt into their mortgage for a number of reasons. One of the biggest is that mortgage interest rates are significantly lower than credit card and personal loan interest rates, and so it can seem cheaper, convenient and more manageable way to reform debt payments into regular mortgage payments each month.

The truth is however, consolidating debt can actually prove to be more expensive and riskier than at first glance. While the interest rate is lower for mortgages than credit cards and personal loans, you’ll also pay them off for far longer which means the amounts you pay as interest can add up over the years to be significantly more than if you had stuck to the shorter repayments schedules of your original debts. Essentially, the more time you spend paying back interest, the more those interest payments will add up.

In addition to that, when you consolidate your debts onto your home, you are putting down your home against being able to make the debt repayments. Your home acts as the security for your mortgage – it will be what your lender takes as compensation if you don’t pay back the mortgage on time. This means that if you can’t afford the new repayment levels after consolidating your debts under your mortgage, you could stand to lose your home.

Alternative options


If you’re struggling with debt and are finding you aren’t managing, you should consider turning to debt experts for help.

There are a number of organisations operating in the UK whose aim is to help people with their debt and money issues. Those organisations will often offer free, confidential unbiased advice and guidance, including help setting up your own debt management plan (DMP) and support with your communications with your lenders.

Two examples of these organisations are debt charities StepChange and the National Debt Helpline.

For more information on debt, money issues, credit cards and lending, check out our money blog.