Can I use my mortgage to consolidate my debts?

The Question

I have found myself in quite serious debt over the last few years. A combination of home improvements and rising prices have meant I now have a loan and have maxed out on a couple of credit cards. My mortgage is manageable as I am on a lower rate, thankfully, but I am considering consolidating the debts using my mortgage.

I’m currently on a five-year fixed rate and this will end in September 2026, so I am not in a position to remortgage yet. Can I get an additional mortgage or extra funds?

Darren’s Answer

There are options open to you when it comes to debt consolidation as part of your mortgage, however, there are some key points to consider.

When it comes to the products and options available, there are three main routes, which I can summarise:

1. An additional loan to an existing residential mortgage

This is often known as a Further Advance. It’s where the additional loan would be with your current lender. The amount you could apply for would be based on the loan-to-value (LTV) of your current mortgage (equity) and affordability.

2. Remortgage to a new lender and borrow more to consolidate debts

If you are nearing your current mortgage product’s end date, you could remortgage to a new lender and borrow more to consolidate debts. Effectively the solicitor will repay your old mortgage, then transfer the surplus funds to you that you can then use to repay your debts.

3. A secured loan or second charge mortgage

Another option is a secured loan. This is normally classed as a second charge loan which can be on different terms to your standard mortgage but tends to be at a higher interest rate with higher fees involved.

The pros…

Borrowing on your mortgage to pay off your debts have some positives, including:

• Helping you achieve your financial goals by providing more disposable income
• Reducing your monthly outgoings overall by having one lower payment each month
• Lowering the interest you pay on your unsecured debts (mortgage interest rates tend to be lower)

The cons…

Regardless of the options above, and the positives noted, do consider the following points:

• Paying back over a longer time means you will likely pay more in interest overall
• Securing debts against your property puts your home at risk if you were to miss payments
• As you are effectively increasing your mortgage, this will reduce the equity in your property
• It may be cheaper to go down another route, such as better unsecured options like a 0% balance transfer credit card or a lower interest rate personal loan. These options can offer lower cost ways of clearing your debt and won’t put your home at risk

Based on your current rate expiring in 2026, remortgaging to a new lender and borrowing more may result in an Early Repayment Charge, which you would need to balance with the savings generated through your debt consolidation and new mortgage rate.

This can be a complicated process, and you need to ensure the outcome will deliver the desired results.

My best advice is to consult a mortgage broker, who can review all options with you and provide guidance tailored to your individual circumstances.

Meet our expert…

Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.

If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.