4 Reasons to Consider a Remortgage to Clear Debt

Remortgaging your home can be an effective way to help deal with your debts. If you are unable to pay your debts, there are a number of options available to you including formal debt solutions, but you should consider remortgaging if you have enough equity in your home. 

By remortgaging your property you can release equity, which can then be used to clear your debts. These are some of the key benefits of remortgaging to clear debts.

1. You could save money by paying less interest

Unsecured debts including credit cards, overdrafts, personal loans, and utility bill debts can all be cleared by remortgaging your home. The interest rates on unsecured debts tend to be higher than secured debts because they are not guaranteed by an asset, like your home. So, if you remortgage your home and use the money to pay off those debts, you could save a lot of money on interest.

2. You can remortgage for a better rate

If you are unable to release cash by way of a remortgage, it may still be worth considering this as an option. Mortgage interest rates fluctuate a lot, so you may be able to get a better rate than you did when you first bought your home. This could allow you to make savings on your monthly mortgage payments, giving you more funds available each month to make your unsecured debt repayments.

However, you are not guaranteed to get a better rate because the deals you are offered are dependent on a number of factors. Lenders will consider your credit score, the value of the property, and how much you want to borrow. If you are in a difficult financial situation already, you may struggle to get a better rate when remortgaging.

3. You can borrow a larger amount if necessary

If you have large debts, you may be able to borrow a larger amount to clear them. The amount that you can borrow is calculated based on the loan-to-value (LTV) ratio. For example on a 90% LTV, this means that the total amount you can borrow against a house that is worth £100,000, is £90,000. If you have paid off a portion of your mortgage already, or your home has increased in value, you may be able to borrow a larger amount.

4. It’s an alternative to a formal insolvency solution

Formal insolvency solutions like bankruptcy or an IVA can help when you are unable to pay your debts. A portion of the debt can be written off and you will make regular payments to clear the rest. Remortgaging is an alternative to formal insolvency solutions and it does not have the same negative impact on your credit score.

If you have a lot of debts and you are unsure how to deal with them, Swift Debt Help can give you the support you need. Get in touch today and we can discuss whether remortgaging or other formal debt solutions are right for you.