Consolidating Debts With A Mortgage: What You Need To Know

Mortgage Debt Consolidation

Managing multiple debts can be overwhelming. With different interest rates and payment schedules it can cause you a lot of financial stress. If you find yourself juggling various debts, debt consolidation using your mortgage might be a solution worth considering.

Debt consolidation involves combining multiple debts and making it one loan. This is often done with an unsecured personal loan, however, there is an option to consolidate debts onto your mortgage. The aim for debt consolidation is to bring all your debts into one manageable, and often lower, monthly repayment.

However as with all debts there are some benefits and risks that you should take into consideration.


What Are The Benefits?

1. Lower Interest Rates

Mortgages generally have lower interest rates compared to other forms of debt like credit cards or personal loans. Consolidating debts into your mortgage can mean that your monthly outgoing can reduce. This means that you have a bit more freedom and flexibility in your monthly budget.


2. One Monthly Payment

As mentioned before consolidating your debts means you’ll have one monthly payment. This can make managing your finances a lot simpler and can help you keep track of your money.


What Are The Risks?

1. Extended Repayment Period

When you consolidate debts into your mortgage you often are not doing it like-for-like. A mortgage is a long-term loan and if you are taking short-term debts and adding them to your mortgage, you could end up paying more back because you are paying the debt back over a longer period of time, compared to if you didn’t consolidate your debts.


2. Risking Your Home

A mortgage is a secured loan, meaning your property is at risk of repossession if you fail to meet repayments. If you are taking unsecured debts (such as credit cards and personal loans) and adding them to your mortgage then you are turning them into secured debts. Meaning that failing to meet your mortgage obligations could result in your home or property being repossessed.


3. Additional Fees

Taking out a new mortgage could result in additional fees, such as legal fees and valuation fees. The debts that you are looking to add to your mortgage may also have fees that are payable for repaying them early. When you are looking to consolidate debts make sure that you factor these into your decision-making process.


Things to Consider

Adding debts onto your mortgage may seem like a good idea, however, before you look go ahead with it you should consider the following things:


1. Seek Professional Advice

You should reach out to a qualified mortgage advisor. They will be able to run the numbers and look into lenders that may be able to help when it comes to consolidating into your mortgage. You should make sure that your mortgage advisor is the whole of market. This will mean that you can be confident that you are getting the best rate available for you.


2. Will You Take Out More Debt?

Once you have consolidated your debts you should work to make sure that you do not go back into debt as consolidating debts again may not be an option in the future. Some lenders will not allow additional borrowing or a re-mortgage for debt consolidation if it has been done in the past.


3. Impact on Credit Score

Debt consolidation may have a temporary impact on your credit score so you should be prepared for potential fluctuations and take steps to rebuild your credit over time.


Now, debt consolidation into your mortgage can be helpful in simplifying your finances and potentially reducing interest rates. However, it’s essential to carefully weigh the benefits and risk, and consider the overall cost involved.


If you want to look at your options for consolidating debts into your mortgage and want to make sure that you are getting the best advice then reach out to Quick Mortgages today by clicking the link here.