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Remortgaging to pay off debt means replacing your current mortgage with a new deal and borrowing more against your home to clear other debts.
This is sometimes called debt consolidation.
It may be used to repay credit cards, personal loans, overdrafts, car finance or other borrowing, depending on your circumstances and the lender’s criteria.
The aim is usually to reduce several separate monthly payments into one mortgage payment.
This can make budgeting feel easier for some homeowners, especially where debts have built up over time or monthly repayments have become harder to manage.
It still needs careful thought. When you remortgage to pay off debt, you may be turning unsecured borrowing into borrowing secured against your home.
You may also be spreading the debt over a longer mortgage term, which could increase the total amount of interest paid overall.
How Does Remortgaging To Pay Off Debt Work?
Remortgaging to pay off debt usually works by increasing the amount you borrow on your mortgage.
For example, if your current mortgage balance is £150,000 and you have £20,000 of debts to repay, you may look at remortgaging for £170,000.
The new mortgage would repay your existing mortgage. The extra borrowing would then be used to clear the debts agreed as part of the application.
The lender will want to know what the money is being used for, how much debt is being repaid and whether the new mortgage remains affordable.
They will also look at your income, outgoings, credit history, property value, mortgage balance and the amount of equity in your home.
Having enough equity does not automatically mean the lender will agree to the extra borrowing. The mortgage still needs to fit their affordability checks.
Why Do Homeowners Remortgage To Pay Off Debt?
Homeowners may look at remortgaging to pay off debt when separate monthly payments have become difficult to manage.
This might include credit cards, loans, overdrafts or other commitments with different payment dates, interest rates and balances.
The issue is not always one large debt. It can be the pressure of several smaller payments being due each month.
Remortgaging can sometimes simplify this by moving the debts into one mortgage payment.
We regularly speak with homeowners who want to know whether this could make their monthly outgoings more manageable, especially when their current mortgage deal is also coming to an end.
The monthly payment may reduce, but that does not always mean the debt is cheaper. The full mortgage term and total interest need to be looked at before deciding.
What Will Lenders Check?
Lenders will check whether the new mortgage looks affordable after the debts have been repaid.
They may ask for details of the debts being cleared, including balances, monthly payments and account information.
They will also check your income, existing commitments, credit history, property value and loan-to-value.
Some lenders are more comfortable with debt consolidation than others. They may limit the amount you can borrow, restrict the loan-to-value or take a different view depending on your credit file.
If the debts have caused missed payments, defaults or other credit issues, this can affect which lenders may be available.
The lender needs to be comfortable that the remortgage improves your position and does not create further financial pressure later.
The Risks Of Securing Debt Against Your Home
Remortgaging to pay off debt can change unsecured borrowing into borrowing secured against your home. That is an important difference.
Credit cards and personal loans are usually unsecured. A mortgage is secured against the property, which means your home could be at risk if the mortgage is not repaid.
The debt may also be spread over a longer period. This can reduce monthly payments, but it may increase the total amount repaid over the full mortgage term.
For example, a loan that could have been cleared over five years may become part of a mortgage running for much longer. This is why the full cost matters, not just the monthly payment.
Can You Remortgage To Pay Off Debt With Bad Credit?
You may be able to remortgage to pay off debt with bad credit, depending on the type of credit issue and how recent it was.
Lenders will look at missed payments, defaults, county court judgments, debt management plans, arrears and how your accounts have been managed overall.
Some lenders may still consider the application if the rest of the case is strong. Others may decline it if the credit issues are recent or the extra borrowing looks too risky.
The amount of equity in the property can also matter, along with your income and whether the debts are being repaid as part of the remortgage.
If your credit file is not straightforward, it is worth checking your position before applying.
A declined application can make things harder, especially if several lenders are approached without knowing which ones are likely to consider the case.
What If Your Current Mortgage Deal Has Not Ended?
You can look at remortgaging before your current deal ends, though early repayment charges may apply.
An early repayment charge is a fee that may be payable if you leave your current mortgage deal before the end of the fixed or discounted period.
If the charge is high, remortgaging straight away may not make sense, even if the new monthly payment looks lower.
A further advance with your current lender may be worth comparing. This means borrowing more from the same lender, rather than replacing the full mortgage.
A product transfer may also be relevant if your current mortgage deal is ending and you are considering staying with your existing lender.
The right route depends on your current mortgage, the debts you want to repay, the charges involved and what lenders are prepared to offer.
Alternatives To Remortgaging To Pay Off Debt
Remortgaging is not the only way to deal with debt.
Depending on your circumstances, it may be worth looking at budgeting changes, speaking to existing creditors, using savings, restructuring borrowing or checking whether a further advance is more suitable.
Some homeowners may be better keeping certain debts separate, especially if they can be repaid over a shorter period without securing them against the home.
Others may need specialist debt support before making a mortgage decision.
If the issue is mainly your current mortgage payment, rather than other debts, a product transfer, term change or standard remortgage without extra borrowing may also be worth reviewing.
The best option depends on the size of the debts, the interest rates, the monthly payments, your income and how long it would take to repay everything.
What If You Are Later In Life?
Remortgaging to pay off debt can become more difficult later in life if income has changed or the mortgage needs to run into retirement.
Some lenders may still consider this where employment income, pension income or other income sources support the borrowing.
Others may restrict the term or the amount available if the mortgage continues beyond retirement age.
If standard remortgaging is not suitable, later life mortgage options may need to be reviewed instead.
This could include a retirement interest-only mortgage or, for eligible homeowners aged 55 or over, equity release through a lifetime mortgage.
These are different routes with different criteria, costs and long-term effects.
This is where it is important not to confuse remortgaging to release equity with equity release itself.
A remortgage is standard mortgage borrowing, while equity release is a later life lending option assessed in a different way.
Should You Remortgage To Pay Off Debt?
Remortgaging to pay off debt may be worth considering if it reduces monthly pressure and fits your wider financial plans.
It may not be suitable if it increases the total cost too much, secures debts against your home unnecessarily, or extends the borrowing over a term that does not make sense.
The monthly payment is important, but it is not the only figure to look at.
You need to understand the full cost, mortgage term, lender criteria, early repayment charges and what happens if your circumstances change later.
Our mortgage advisors at UK Moneyman can look at your current mortgage, debts, property value and income to help you understand whether remortgaging to pay off debt may be suitable.
