Doris & Vi have looked at three examples of how mortgage customers can consolidate debt.
If you have racked up a large amount of debt across credit cards or loans and want to consolidate them into one simple monthly payment which will reduce the monthly cost, then a Doris & Vi can look at your individual situation and recommend the best product to suit your needs.
Taking out a remortgage to consolidate debt means that you will be borrowing additional funds to clear the debt. These funds will be added to your current mortgage loan and secured against your home.
Some customers choose to consolidate debt because it can be cheaper than paying multiple expensive loans and credit cards, helping you to free up money to spend on the things you want and need. However, because the borrowing will be stretched across your mortgage term it could be costlier overall, therefore, it is important to discuss your needs and circumstances with a qualified Mortgage Broker whether this is the right option for you.
Customers with a poor credit score or some historic adverse, who may have been turned down for further borrowing with their current lender may still be able to remortgage through a specialist mortgage lender. These lenders offer products tailored specifically to meet the needs of customers in these situations and understand that consolidating debt may help your finances. In the past, some specialist mortgage lenders have charged sky-high interest rates and fees. However, these practices have been abolished and some specialist lenders now offer rates which rival high street competitors plus offer cashback incentives.
Second Charge Mortgage
A second charge mortgage (aka secured loan) works just like a normal mortgage. It’s secured against your property and you will make monthly repayments until the full loan and interest are paid back.
Here are just a few scenarios when borrowing funds through a second charge mortgage may be better for you than remortgaging:
- If you have been declined a remortgage because you have missed some payments on your mortgage or other financial commitments since taking out your mortgage.
There is a wide range of second charge lenders who offer a flexible stance when it comes to adverse credit because every application is manually approved by an Underwriter, meaning that the lender will take the time to assess the reason for the debt.
- You currently have a cheap mortgage rate that you don’t want to lose.
A second charge mortgage is a separate loan and will not affect your current mortgage, so therefore your current mortgage rate and terms will not be disturbed. We will need to still contact your mortgage lender to gain consent for the second charge mortgage.
- Your current lender would charge you expensive early repayment charges (ERCs) is you were to remortgage before the end of the fixed deal.
If you are tied into your current deal, then a second charge mortgage allows you to borrow the funds you need without disturbing your mortgage.
- If you cannot borrow the amount that you need through a remortgage.
Second charge lenders apply more generous affordability calculations than mortgage lenders, sometimes up to six times your income, which means that you can borrow a little extra.
For all of the scenarios above, a Mortgage Broker will compare remortgage products and second charge mortgage products side-by-side to decide on the most cost-effective option to suit your needs.
Borrowers over the age of 55 years may wish to release funds tied up in their home to consolidate debt. Cash can either be released from your home in the form of a tax-free lump sum or income for life, depending on your needs.
Equity release (aka lifetime mortgages) have risen in popularity in recent years as many mortgage lenders have introduced stricter affordability calculators which have limited the amount they will lend to older borrowers. Also, borrowers who currently have an interest-only mortgage that is coming to an end with no repayment plan in place or desire to move home, are also turning to equity release to repay their mortgage.
Not all Mortgage Brokers can offer equity release to their customers because it requires the Adviser to have passed an additional qualification. Doris & Vi’s Advisers are qualified and will meet with you face-to-face to assess whether this is the best type of finance to cater to your needs.
Here to help
For a free no-obligation chat about the best option for you to consolidate debt contact our whole of market Mortgage and Protection Brokers on 01325 605006 or arrange a call back.