Remortgaging to pay off debt, Cardiff
You can remortgage your Cardiff property to raise capital to pay off debts as long as you have enough equity in your property and qualify for a bigger mortgage. When you remortgage to pay off debts it means getting a new mortgage and clearing your outstanding debts at the same time to make your monthly outgoings more manageable. We explain what’s involved and what you need to consider first.
There are two main ways to pay off your debts through remortgaging. You could either:
- remortgage to a cheaper deal, which reduces your monthly mortgage payment, freeing up money to pay off debts, or
- remortgage and in doing so release equity in a lump sum to pay off your debts.
Remortgaging to pay off debts
In order to remortgage to pay off debts, you take out a new mortgage on your current home which includes the outstanding value on the previous mortgage, plus the value of the equity you want to release. You would then use the money you have released to settle your debts.
The idea is that by paying off debts that have high-interest rates using a mortgage with a much lower interest rate, your monthly repayments will reduce, making them more manageable. But it means taking out a bigger mortgage, which you shouldn’t do lightly. Speak to one of our friendly Mortgage advisors who’ll be happy to help you with any remortgage queries
Should I remortgage to pay off debts?
If you’re an Cardiff homeowner and have debts, there are a number of reasons why remortgaging to pay off debts may be a worthwhile option.
Remortgaging could improve your situation if:
- You’re paying high-interest rates on your debts. If you’re paying high-interest rates, for example on credit cards, and you shift this debt onto your mortgage, the rate you pay will be much lower. This should make your monthly payments much more manageable.
- You could get a better mortgage deal: If you shop around, you may find you can get a better mortgage deal than you’re currently on. However, you’ll need to factor in any fees you may need to pay, such as an early repayment charge if applicable. It’s a good idea to speak to one of our advisors.
- You’ve built up a significant amount of equity in your home: If you have enough equity in your home, releasing some of it by remortgaging might be the most cost-effective way of paying off the debts, especially if you secure a mortgage with a low-interest rate at the same time.
We will always endeavour to give you the best advice based on your current circumstances. Staying with your current lender or switching lenders, we will always have your best interests at heart.
Book An Appointment
Visit Our Office
Remortgage to pay off debts in Cardiff – Frequently asked questions!
Our friendly and experienced team are always at hand to help and advise. Customer service at Lexion Financial Advisors is of paramount importance to our team. Let us help you with your remortgage of debt consolidation – just get in touch!
Debt consolidation mortgages – how do I qualify?
As well as remortgaging to pay off debt, there are numerous other reasons for raising capital when you remortgage. These include funding major home improvements such as a home extension, or a new kitchen.
Each lender will have its own criteria on the maximum they are prepared to lend in each situation. So the amount of equity you have in your home will be a key factor in whether you are able to remortgage to pay off debts.
Plus, you will be applying for a larger mortgage. This means you must satisfy the lender’s affordability checks so that they are satisfied that you can afford the repayments.
If you’re looking for a debt consolidation mortgage and don’t have a huge amount of equity in your property, a specialist lender may be your best bet. However, this may involve paying higher interest rates. So it’s a good idea to chat with one of our advisors who will go through this with you.
Is further borrowing allowed with your current mortgage deal?
Your current mortgage lender may or may not allow further borrowing. If they do, check the costs and fees involved. You will also be increasing the size of your mortgage by doing this. But it may be an option for you if you are tied into a mortgage deal and will have to pay an early repayment charge if you remortgage.
Can you get a mortgage with outstanding debt?
If you have debt and you’re applying for a mortgage, you may be worried that it will rule you out of being accepted. However, debt won’t stop you from getting a mortgage automatically but if it, for example, shows financial irresponsibility your lender will take this into account. If you can prove that you have been managing your debt well and have kept up to date with your repayments, this should increase your chances.
Remortgaging with bad credit
When you apply for a mortgage, the lender will look at your credit file to get an idea of how well you manage debt.
If you’ve ever been declared bankrupt or had a County Court Judgement (CCJ), your credit rating is likely to be poor. And if the lender sees that you have debts and if you are struggling to keep up with repayments this may make it less likely that you will be accepted. Or you may be offered a lower amount and at a worse interest rate.
If you want to remortgage to pay off debts and you have a bad credit score, we can dvise you on ways to improve your credit rating before applying.
Talk to our experts
Remortgaging is a big decision and if it’s done right, it could really improve your current financial situation. Speak to our mortgage advisor today for advice on whether remortgaging is right for you.