Consolidate Debt Using the Equity in Your Home

Filed under: Debt Consolidation Mortgages

When you are thinking about refinancing your home for debt consolidation purposes, here are a few important elements that you need to consider before making the decision. Read on for some invaluable remortgage for debt consolidation information.

Remortgage for Debt Consolidation

If you are searching for a simple solution to your debt problems and you own a property worth more than your current mortgage loan you may wish to consider the possibility of a remortgage for debt consolidation. Debt consolidation is mainly beneficial for those who convert a number of debt payments into a single monthly repayment. Using the excess equity in your home may be the best way forward to solving some of your current financial debt problems. A Remortgage to consolidate debt implies that the terms of mortgage are re-negotiated including an increase in the amount of money borrowed. This is generally possible due to the growth (equity) in the value of your existing property.

A debt consolidation remortgage can bring improved terms from your current mortgage lender or alternatively you can switch to a different lender who offers better mortgage terms. A remortgage for debt consolidation aims to reduce your monthly debt repayment and to consolidate all your debts.

Some Advantages

A remortgage for debt consolidation can offer a number of advantages which may include:

• A lower interest rate

• A release of equity from your property which can be used in paying off debt

• A easy way to manage your monthly budget as all your debts and mortgage repayment can be included in one simple payment

Mortgage Vendor Tips

• Make sure that you understand the terms and conditions of your current mortgage deal before looking into a remortgage for debt consolidation so that you are in a position to compare the alternatives.

• Ensure that you are aware about “tie-ins” and “penalties” within the new remortgage deal. If you choose a mortgage which includes penalties for changing mortgage lenders or locks you into a lender for a fixed period, make sure you’re your plans fit within the criteria.

• Do get advice from a mortgage broker who has access to the whole of the market and can therefore help you in weighing up all the schemes available to you.

• Watch out for any “early repayment charges” which may be incurred if you decide to pay off your mortgage before the agreed time period.

• Remember to include all the fees involved in a remortgage for debt consolidation. Fees vary considerable from lender to lender and scheme to scheme. Areas to think about are: the legal fees, the valuation fee (you will be required to re-value the cost of the house), the arrangement fee (money paid to the lender for the re-mortgaging paperwork involved) and the broker fee.

• Try to resist the temptation to extend the length of your current mortgage term. It is usually a false economy which appears to be cheaper but it costs more overtime when you look at the total interest you will pay.

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