Remortgage

The answer to your money worries may lie in your home. Millions of properties all over the UK are worth much more than the mortgage secured on them, and that extra value (known as 'equity') can be released, helping their owners free up cash, finance home improvements - or pay off their unsecured debts.

Remortgage: how does it work?

If you're a homeowner with unsecured debts, you'll be making multiple payments every month: your mortgage payment and your payments to your other debts. A debt consolidation remortgage could save you money every month and simplify your finances, so you make just one monthly payment - your mortgage payment.

Why would I want to remortgage?

If you're thinking of consolidating your debts, a debt consolidation mortgage could be the best way of doing it. Why?

• First, there's the monthly payment - as the above example shows, you could seriously reduce your monthly outgoings.
• Second, there's the interest rate. The interest rates on mortgages tend to be lower than on loans - and much lower than on credit cards. In other words, your debt would be growing much more slowly than it is right now.
• Third, there's the repayment period. Most mortgages are repaid over decades, rather than years. This means you'd be spreading your payments out with a remortgage, so each monthly payment should be much lower than it is right now.
• Fourth, there's the amount you can borrow. Mortgages and secured loans can be much larger than unsecured loans. As long as you can show that you can afford the repayments, lenders are much more likely to lend you more.
• Fifth, there's the sheer simplicity of making one payment per month. It's a lot harder to forget, and it's a lot easier to budget for - you'll know exactly how much you need every month, which means you're less likely to run out of money before you've paid what you need to. In other words, if you remortgage to consolidate your debts you should be less likely to miss payments, which can lead to charges, legal problems and damage to your credit report.

Are there any downsides?

There are.

• First, securing any debt against your home can put your home at risk if you don't keep up with your repayments.
• Second, you'll probably be repaying your (currently unsecured) debts for longer if you included them in a remortgage. One reason your monthly payments would be lower is that you'd probably be making more of them by repaying the money over a longer period of time. (Note however, that credit card debts for example, can take many years to pay off if you are only making the low minimum monthly payments which barely cover the monthly interest charges.)
• Third, if your debts take longer to repay, you'd be paying interest for longer if you remortgage. This means that you can end up paying more in total.