Releasing Equity To Pay Debt
Also known equity release, a remortgage allows money tied up in a property or other asset to be made available to pay unsecured creditors.
How a remortage debt solution works
A mortgage is one of the cheapest forms of borrowing- but be wary of the possible consequences of turning all your unsecured debts into one debt secured on your home.
Remortgages are only available to home owners who have enough equity in their homes to cover of the unsecured debts.
You apply to a mortgage lender for a loan to reorganise, or clear your debts. This means you swap some or all of your creditors for just one creditor. You should seek independent advice about whether this would be in your best interests.
Important: If you can’t pay a remortgage or secured loan taken out against the value of your home, your lender may take action to repossess your home.
A remortgage will only help if :-
- It is used to pay some or all of your existing debts.
- The repayments on the remortgage are no more than those you are already making towards your existing debts, and you can afford to make them.
Otherwise, the remortgage will simply add to your debt burden and make your problems worse. This could put your home at risk.
You will need to look carefully at how long the loan will take to repay, what interest you are going to have to pay compared with what you are currently charged; and what charges or penalties there are, for example for late payments.
Remortage Benefits
A single payment
You will be making one monthly payment on one loan rather than many payments to different creditors.
Lower payments
Your monthly payments may be lower, or at least should not be any higher.
Remortage Considerations.
Sufficient equity needed
You must be a homeowner with sufficient equity to cover the amount of the remortgage.
Changing interest rates
Interest rates often change over the loan period, making it difficult to work out what the total cost of the loan will be – check if the interest rate is fixed or variable.
Arrangement fees
You may have to pay fees for arranging the remortgage. Always ask for full written details of all fees.
Consider overall cost
Remortgages are often over a longer period than your original debts. So, even if the interest is reasonable, the time you take repay it can increase the overall cost of the loan significantly, so you end up paying more.
All debts covered?
If you don’t clear all your existing borrowing, the new loan is likely to make your debt problems worse and make it more difficult for you to make all your payments.
How We Can Help
We do not directly offer this solution. However we can assess your situation and advise on your suitability for this and for other options.