If you’re in the position where you think debt consolidation would be a wise move then it may be a good idea to consider consolidating your debts through re-mortgaging.
This may seem like a foolish idea in the current climate when re-mortgaging has become something of a dirty word. After all, wasn’t it this kind of short-term view that contributed to the credit crunch and the economic woes we’ve been witnessing over recent years?
This is certainly true to a certain extent, but re-mortgaging can still be a wise move to take to ease your debts if you approach the task in the right way.
A re-mortgage involves taking out a new mortgage and repaying your existing one in order to realise equity and sometimes to reduce your monthly debt repayments. And with interest rates at all-time lows, there’s never been a better time to re-mortgage if you meet the criteria.
A re-mortgage can be an excellent debt consolidation tool when your debt is relatively small and you have equity in your home. The equity released from your home can then be used to pay off all or part of your debt burden. If your re-mortgage leads to a lower monthly payment – and there’s every chance that it will while interest rates remain so low – it may also mean that any remaining debt is easier to budget for. In this way, a re-mortgage can be similar, in principle, to a consolidation loan, but should be at better rates if you shop around.
Do bear in mind, however, that there may be redemption charges involved for leaving your current mortgage provider if you previously agreed to stay with that provider for a fixed term.
Also, your new mortgage provider will need a surveyor’s valuation on your property – though the re-mortgage provider will often pay for this and some other re-mortgage costs.
Overall, remember that re-mortgaging can be an excellent way of easing your debt burden – but only if you use it wisely. In other words, try not to fall into bad habits once you’ve re-mortgaged as you could even lose your home, ultimately.