Created by: Dave Harland | 19 November 2019

Should you remortgage to pay off debt?

If you’re struggling with debt, remortgaging could help you pay off existing loans, but it’ll probably cost you a lot more in the long run. 

Before you do anything, get free, confidential advice from a debt advice service to see where you stand and what your options are.

What does remortgaging mean?

Remortgaging your property means taking out a new mortgage on a property that you already own, to replace the current mortgage or to borrow money against your property. 

While it can be cheaper than taking out a payday loan to pay for debts, essentially, you’re adding your existing debt to your mortgage. This can be risky. 

After all, unsecured loans like overdrafts and credit cards may cost money, but they’re not connected to your home, so if you can’t afford to repay them, your home isn’t in danger. 

Should I remortgage to pay off debts?

Remortgaging to pay off debts can seem like a quick fix, but you could get into a tricky situation.

Often people will renegotiate a higher mortgage to include their debts. But they soon have empty credit cards with no debt on them and spend with these cards, because they can. 

Suddenly, they have a bigger mortgage payment and lots of new debt on the old credit cards every month, putting them in a worse state than before!

Unless you’re going to change the way you think and act, and know you won’t be tempted to spend again, remortgaging probably isn’t the right choice for you. 

Things to think about when remortgaging to clear debt

  • Are there any other ways to pay off your debts, such as controlling your spending habits with a weekly budget?
  • If you go ahead and remortgage, close down the loans, credit cards and overdrafts you’ve paid off so that you won’t be tempted to use them again. 
  • If you fail to keep up with mortgage payments, you could lose your home. 
  • Remortgaging could work out to be more expensive in the future as any money added to your mortgage will increase your monthly payments.

Weigh up all the options

Remortgaging isn’t something you should rush into.

Meet with a mortgage broker for the best advice and to make sure you’re getting the best deal.

They’ll not only tell you what’s available for your current circumstances, but can explain just how expensive remortgaging to pay off debts can be if you’re not careful.