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Mortgage Debt Consolidation

How to Consolidate Your Mortgage Debt and Potentially Save Money

If you have a mortgage and other debts, such as credit cards, loans or overdrafts, you may be wondering how to manage them effectively and reduce the amount of interest you pay. One possible solution is mortgage debt consolidation, which is a form of debt refinancing that entails taking out a new mortgage loan to pay off your existing mortgage and other debts.

Family saving money

What are the benefits of mortgage debt consolidation?

Mortgage debt consolidation can have several advantages, such as:

Simplifying your finances

Instead of having to keep track of multiple payments and due dates, you only have one monthly repayment to make.

Reducing your interest rate

Depending on your credit score and the terms of your new mortgage loan, you may be able to secure a lower interest rate than what you are currently paying on your existing mortgage and other debts.

Improving your cash flow

By spreading your repayments over a longer term, you may be able to lower your monthly outgoings and free up some money for other expenses or savings.

What are the drawbacks of mortgage debt consolidation?

Mortgage debt consolidation is not a magic bullet that will solve all your financial problems. It also comes with some potential pitfalls, such as:

Increasing your total cost

If you extend the repayment term of your new mortgage loan, you may end up paying more interest in the long run, even if the rate is lower.

Tempting you to overspend

If you clear your credit card balances or overdrafts with a mortgage loan, you may be tempted to use them again and rack up more debt.

Putting your home at risk

If you take out a larger mortgage loan to consolidate your debt, you may increase the risk of negative equity (when your property is worth less than your mortgage) or repossession (when your lender takes your property if you fail to repay)

Person calculating mortgage costs

How to choose the best mortgage debt consolidation loan for you

If you decide that mortgage debt consolidation is right for you, Newhomes and help you compare different options to find the best deal. Here are some factors to consider:

The interest rate

This is the most important factor, as it determines how much interest you will pay over the life of the loan. Look for the lowest APR (annual percentage rate) possible.

The loan term

This is the length of time you have to repay the loan. A shorter term means higher monthly payments but less interest overall. A longer term means lower monthly payments but more interest overall.

The loan amount

This is the total amount of money you borrow. You should only borrow enough to cover your existing mortgage and other debts and not more than you can afford to repay.

The fees and charges

Some lenders may charge fees for setting up or administering the loan, or penalties for early repayment or missed payments. These can add up and increase the cost of the loan.

The eligibility criteria

Some lenders may have stricter requirements than others for approving a consolidation loan. You may need a good credit score, a stable income and a low loan-to-value ratio (the percentage of your property value that you borrow) to qualify.

Credit Score Check

Where can I get help with mortgage debt consolidation?

If you need help with choosing or applying for a mortgage debt consolidation loan, you can speak to one of our expert mortgage advisors, who can offer impartial and free advice.

Mortgage debt consolidation can be a useful way to simplify your finances and save money on interest. However, it is not a quick fix and it requires careful planning and discipline. Before you take out a consolidation loan, make sure you weigh up the pros and cons and compare different options to find the best deal for you.

If you are interested in finding out more about mortgage debt consolidation or want to apply for a loan, get in touch with Newhomes today. We have access to over 65 lenders and thousands of products, so we can help you find the best solution for your situation by offering expert mortgage advice. Call us on 0800 129 077 or read more about debt consolidation.