If you have credit cards, loans, car finance or other borrowing, you may be wondering whether you can use your mortgage to clear those debts.
Debt consolidation through your mortgage may be possible, but it needs careful thought. It can sometimes reduce monthly outgoings, but it can also increase the total interest you pay and turn unsecured debts into borrowing secured against your home.
That means the lowest monthly payment is not always the safest or best option. A lender will usually need to check your equity, affordability, credit profile, current mortgage balance and the debts you want to repay.
Muttuo Mortgages can help you understand whether consolidating debts through your mortgage may be suitable and compare options across over 100 lenders before you make a decision.
Key takeaways before consolidating debts with your mortgage
- Monthly payments may fall
Spreading debts over a longer mortgage term can reduce monthly outgoings, but that does not always mean the total cost is lower.
- Total interest can increase
Short-term debts may cost more overall if they are repaid over many years through your mortgage.
- Your home could be at risk
If unsecured debts are added to your mortgage, they become secured against your home.
- Affordability still needs checking
Lenders will check whether the new mortgage balance looks affordable alongside your income, spending and commitments.
- Suitability depends on your situation
Debt consolidation is not right for everyone. The reason for the borrowing, the total cost and your wider financial position all need to be considered.
What does debt consolidation with your mortgage mean?
Debt consolidation means using one form of borrowing to repay other debts.
In a mortgage context, this usually means increasing your mortgage or arranging another loan secured against your home, then using the extra borrowing to repay debts such as credit cards, personal loans, overdrafts or car finance.
For example, you may owe:
- £6,000 on credit cards
- £8,000 on a personal loan
- £4,000 on car finance
You may then ask whether you can borrow an extra £18,000 through your mortgage to clear those balances.
This can make your monthly payments look lower if the debt is spread over a longer term. However, it can also mean paying interest for much longer, and the borrowing may become secured against your home.
How consolidating debts can affect cost
The biggest risk with debt consolidation is focusing only on the monthly payment.
A credit card or loan may have a higher interest rate than your mortgage, but it may also be repaid over a much shorter period. If you add that debt to a mortgage and repay it over 20 to 30 years, the monthly payment may fall, but the total interest paid could increase.
Consolidating debts can also increase the amount secured against your home. This can affect your loan-to-value, lender options and long-term risk.
Why lower monthly payments can cost more
Kept as a 5-year personal loan
5-year personal loan at 9%
£311 per month
Approximate monthly payment
£3,680 total interest
Approximate interest over the term
What this means
The monthly payment is higher, but the debt is cleared sooner, and the total interest is lower.
Added to a mortgage
Added to a 25-year mortgage at 5%
£88 extra per month
Approximate extra monthly mortgage payment
£11,300 total interest
Approximate interest over the term
What this means
The monthly payment is lower, but the debt is repaid over a much longer period, and the total interest is higher.
Illustrative example only. Figures are approximate and do not include fees. Actual payments and costs depend on the amount borrowed, interest rate, repayment term, fees, lender criteria and your circumstances.
This example shows why the lowest monthly payment is not always the cheapest option overall. Adding debts to a mortgage may reduce monthly pressure, but it can increase the total interest paid over time and increase the amount secured against your home.
Check the full cost before deciding
A lower monthly payment does not always mean a cheaper option overall. Muttuo Mortgages can help you compare the monthly saving, total interest, fees and long-term risk before you decide.
Why secured borrowing changes the risk
Credit cards, overdrafts and many personal loans are usually unsecured. That means they are not directly secured against your home.
If you consolidate those debts into your mortgage, the position can change. The debt may become part of borrowing secured against your property.
This matters because your home may be at risk if you do not keep up with repayments on your mortgage or any other borrowing secured against it.
That does not mean debt consolidation is always wrong. However, it does mean the decision needs to be assessed carefully. You need to understand the monthly payment, total interest, term, fees, lender criteria and what happens if your circumstances change.
What lenders may check
Lenders do not only look at whether you have enough equity. They also need to understand whether the new borrowing looks affordable and suitable.
Available equity
Equity is the difference between your property value and your mortgage balance.
If your home is worth more than you owe, you may have equity that could support extra borrowing. However, lenders will usually limit how much you can borrow based on loan-to-value, affordability and the reason for the borrowing.
Affordability
A lender will usually review your income, spending, debts and regular commitments.
Even if consolidation reduces your monthly outgoings, the lender still needs to check whether the new mortgage balance is affordable and whether the borrowing makes sense for your wider circumstances.
Current debts
The lender may ask what debts you want to repay, how much is outstanding and whether they will be cleared in full.
They may also want to know whether the debts are credit cards, loans, overdrafts, car finance or another type of borrowing.
Credit profile
Your credit file helps lenders understand how you have managed borrowing in the past.
Missed payments, defaults, high credit use or recent applications can affect how a lender views the application.
Reason for consolidating
Lenders may ask why the debts have built up and whether consolidation is likely to improve your position.
If debts are increasing because monthly spending is higher than income, adding them to the mortgage may not solve the underlying issue.
Unsure if debt consolidation is suitable?
Debt consolidation through your mortgage needs to fit your equity, affordability, spending patterns, and long-term plans. We can help you understand what lenders may consider before you apply.
Ways to consolidate debts using your home
Using your mortgage to clear other debts is not just a question of whether you can borrow enough. It is also about which debts are being cleared, how much interest you may pay over time and whether the change genuinely improves your position.
The debts being cleared
Start by listing the debts you want to repay, including credit cards, personal loans, overdrafts or other commitments.
You should check the balance, interest rate, monthly payment and whether there are any early settlement charges.
The new mortgage balance
If the debts are added to your mortgage, your mortgage balance increases.
This can affect your loan-to-value, monthly payments, lender options and the amount secured against your home.
The repayment term
A debt that would have been cleared in a few years could be repaid over a much longer mortgage term.
That may reduce the monthly payment, but it can also increase the total interest paid over time.
The spending pattern
Debt consolidation is more likely to help if the original debts are fully cleared and the same borrowing does not build up again.
If the debts were caused by ongoing overspending, adding them to the mortgage may only move the problem rather than solve it.
The long-term risk
Credit cards, overdrafts and personal loans are often unsecured. If they are added to your mortgage, they become secured against your home.
That means the decision needs to be based on total cost, affordability and risk, not just the lower monthly payment.
When debt consolidation may make sense
Debt consolidation may be worth exploring if it supports a clear, affordable and realistic plan.
Debt consolidation may help if
Your monthly payments need to fall
Spreading debts over a longer period may reduce your monthly payments.
The total cost still works
The monthly savings need to be weighed against the total interest paid over time.
You have a stable budget
Consolidation is more likely to help if your future spending is under control and the same debts are unlikely to build up again.
Debt consolidation may not suit you if
Your budget is already under pressure
Adding debt to your mortgage may increase risk if you are already struggling to keep up.
The long-term cost is too high
A lower monthly payment can become expensive if the debt is repaid over a much longer term.
The debts could build up again
If credit cards or loans are cleared but then used again, you could end up with a larger mortgage and new debts.
Alternatives to consider first
Using your mortgage is not the only way to deal with debts. Depending on your circumstances, other options may be more suitable.
You may want to consider:
- reviewing your budget and spending
- speaking to existing creditors
- using savings carefully, if appropriate
- Looking at a personal loan or balance transfer
- seeking debt advice if you are struggling to keep up with payments
- reviewing whether a remortgage, further advance or second charge mortgage is appropriate
The right option depends on the type of debts, interest rates, repayment terms, affordability and your wider financial situation.
If you are already missing payments or feel unable to manage your debts, getting debt support may be more appropriate than increasing borrowing secured against your home.
Before you consolidate debts with your mortgage
Before making a decision, check how consolidation could affect five things:
01 Your monthly payment
Compare your current debt payments with the new mortgage payment after consolidation.
02 Your total interest
Check whether spreading debts over a longer term could increase the total interest paid.
03 Your home security
Understand that unsecured debts may become secured against your property.
04 Your future borrowing habits
Think about whether the debts could build up again after consolidation.
05 Your total cost
Review the rate, term, fees, early repayment charges and any other costs before deciding.
Need help changing your mortgage term?
Debt consolidation can reduce monthly pressure, but it can also increase long-term cost and risk.
Muttuo Mortgages can help you compare your options across over 100 lenders before you decide.
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Frequently asked questions about consolidating debts with your mortgage
Can I use my mortgage to clear other debts?
It may be possible, but it depends on your equity, affordability, credit profile, lender criteria and whether the borrowing is suitable.
Some homeowners use a remortgage, further advance or second charge mortgage to repay debts such as credit cards or personal loans.
However, the lender will need to check whether the larger mortgage balance is affordable and whether the purpose of the borrowing fits its criteria. You should also consider the risk of securing debts against your home.
Is it cheaper to consolidate debts with my mortgage?
Not always. The monthly payment may fall, but the total cost can increase if the debt is repaid over a longer term.
Mortgage borrowing is often repaid over many years. This can reduce monthly payments, but it may also mean paying interest for longer.
The important comparison is not only the monthly saving. You also need to compare fees, interest rate, mortgage term and total amount repayable.
Can I consolidate credit card debt into my mortgage?
Some lenders may allow this, but it depends on your circumstances and the lender’s criteria.
Credit card debt is usually unsecured. If it is added to your mortgage, it becomes borrowing secured against your home.
This may reduce monthly payments in some cases, but it can increase total interest and increase the risk to your home if payments are not maintained.
Will consolidating debts affect my credit score?
The impact depends on how the borrowing is arranged and how you manage payments afterwards.
A mortgage application may involve a credit search. If debts are cleared and payments are maintained, your credit position may improve over time.
However, if you build up new debts again or miss mortgage payments, your credit file and home could both be affected.
Can I consolidate debt if I have bad credit?
It may be harder, but some lenders may still consider your application depending on the details.
Lenders will look at the type of credit issues, how recent they are, your income, equity, affordability and the debts being consolidated.
A poor credit profile can limit lender options and may affect the rate or amount available.
Is debt consolidation through a mortgage risky?
Yes, it can be risky because you may be turning unsecured debts into borrowing secured against your home.
The main risks are higher total interest, a larger mortgage balance, longer repayment period and the possibility of losing your home if you do not keep up repayments.
It should only be considered after looking at affordability, alternatives and whether the change is genuinely suitable for your circumstances.
Should I speak to a mortgage broker before consolidating debts?
Yes, mortgage advice can help you compare options and understand the risks before applying.
A broker can help you compare remortgaging, further advance and second charge options. They can also help you understand lender criteria and whether the new mortgage looks affordable.
If you are already struggling with repayments or missed payments, it may also be sensible to speak to a debt adviser before securing debts against your home.
