How does a remortgage work?
When you remortgage to clear debt, you’re essentially switching your existing mortgage deal for a new mortgage. You might decide to switch lenders as well as mortgage products because this can help you access cheaper deals or more flexible agreements.
Alternatively, your current lender might also be able to offer you a competitive remortgage rate, so it’s always worth asking. When you remortgage, you can release equity in your home which can then be used to clear any debts that you owe.
Will I be able to remortgage my property to clear debt?
Every lender has their own set of eligibility criteria that you’ll need to meet if you want to successfully apply for a remortgage with them. Each one will have different terms too, like the length of the agreement, how much their fees are and what interest rate you’ll be charged.
Before you decide about which lender to apply to, it’s a good idea to check your eligibility so you know beforehand which ones will be more likely to accept you and which ones to steer clear of.
You’ll also need to have equity in your property i.e. you’ll need to have cleared some of your current mortgage or have a property that has risen in value since you made the initial purchase. Usually, the more equity you have, the better your choice of remortgage lenders.
Your mortgage broker will check your eligibility by looking at the following:
Your annual gross income
The regularity of your income
Your outgoings including debts, childcare, travel, groceries, utilities
Your credit history
The market value of your property
How much equity you have
How much you want to borrow
How do I know if I’m eligible to remortgage?
You can ask a mortgage broker who can look at all the factors that lenders will examine, before you apply so that you can avoid wasting money and time applying to the wrong one and potentially getting rejected. Lots of homeowners make the mistake of going to their current lender, without checking their eligibility and without comparing the other deals that are available elsewhere.
While you might have got approved for a mortgage when you first bought your property, your situation now is likely to be different. For example, you might have changed jobs, you might be self-employed or have more children or parents living with you, depending on your income.
You’ll also be closer to retirement age and that can have a big effect on your choice of lenders, as the closer you get to that, the more scrutiny your income will face, as often, retirement results in a drop in annual income.
It’s not just your circumstances that may be different, the market has changed too. With interest rates changing and inflation expected to rise, many lenders have pulled their cheapest mortgage products from the market.
While there are still plenty of great deals available, the affordability checks that you’ll need to pass may seem stricter, with some remortgage lenders requiring you to have substantial equity built up in your property and an impeccable credit history.
Will checking my eligibility damage my credit score?
It shouldn’t do, no. When you have a broker check your eligibility for a remortgage they’ll usually run a soft credit check as opposed to a hard credit check which does affect your credit report and subsequently your credit score.
If and when you decide to apply for a remortgage, a hard credit check will occur so that the lender can get an extensive view of your repayment habits and financial history.
That’s why it’s vital to check beforehand if you’re likely to get approved for that specific lender because if you don’t, you could end up getting rejected for a remortgage.
Will my bad credit stop me from remortgaging to pay off debt?
Not necessarily because there are remortgage lenders that are more equipped to lend to borrowers with bad credit. Having bad credit isn’t uncommon and while it can reduce your options when it comes to choosing a lender, it’s one of the most common reasons for a remortgage.
Don’t let bad credit stop you from remortgaging, just be clever about getting the right advice from a qualified and reviewed broker and not rushing into making an application.
How to maximise your chances of approval for a remortgage so that you can clear debt
Don’t apply for credit ahead of your remortgage application
Make sure you’re signed up to the electoral
Manage your current debts by making repayments on time
Have savings if possible
Spend your money wisely and don’t gamble or spend large amounts on retail
Organise the documents needed for a remortgage
Provide accurate information about your finances and situation
Things for you to consider before you remortgage
Do you have enough equity?
How much will it cost?
Will remortgaging give you enough money to pay off your debts?
Will borrowing more result in your monthly outgoings increasing or decreasing?
Could you afford the repayments of the new remortgage?
Do you have enough money to pay any fees involved when remortgaging?
What type of remortgage would suit your situation best, a variable rate or fixed-rate mortgage?
Non judgemental advice about remortgaging to consolidate debt
When you contact The Mortgage Hut, you’ll be greeted by a discrete advisor who won’t make you feel judged for enquiring about remortgaging to pay off debt. Our mortgage brokers help countless people remortgage for this reason so listening to your questions will be second nature to them.
Falling into debt can happen to anyone for a number of reasons. Call 023 8098 0304, WhatsApp or use the contact form to leave us your details and we’ll make sure the right person gets in touch with you to give you the information you need.
Remortgaging to pay off debt FAQS
Can I extend the term length of my mortgage to clear debt?
Possibly yes. You could consider changing the term length of your current mortgage agreement in order to reduce your monthly repayment. The money you save on larger repayments could be used to pay off your debt. Calculate your options with a mortgage broker so you know whether you could reduce your monthly repayment enough to cover any debts you have before making a decision.
What are the alternatives to remortgaging?
Unsecured personal loans
These can typically be more expensive as the interest rate for a personal loan or credit card is higher and the repayment term much shorter, ranging between months or up to 10 years. The amount you’re charged for a personal loan and the terms of the repayment will vary between different banks and lenders based on your credit history, level of debt and income, so always compare the market and look at the alternatives which could cost you less.
Borrowing from family
This won’t be possible for everyone but if you do have a close family that can help you out by lending you money to clear your debts, you could save yourself some money rather than borrow more on a remortgage or personal loan.
It can be a good idea to be open and honest about your debts and have a plan to make fair repayments ahead of asking your family to help. Offer to have a contract too, so that all those involved are aware of how much money is needed to be borrowed, when the repayments will be made and how much you can afford to repay.