How can I raise funds to consolidate debts?

Consolidating Debt 

It’s always worth looking through lender's affordability calculators, which you can find on their website. Raising funds on your property will depend on you meeting the lenders criteria, particularly the credit score and also your property being acceptable security for a mortgage. 

You would have a choice of variable or fixed rate with a new lender and would qualify for a free valuation and free legal package if you wished. However, before you explore this route it is suggested that you approach your existing lender to see what choices they would offer you in conjunction with additional borrowing to repay your debts. 

Remortgaging As an Option 

If your existing lender is not happy to help or they don't have an attractive selection of products to choose from you can consider remortgaging the property. They would lend you the money required to repay additional funds required to pay off your other debts.  A few lenders will not let you borrow for debt consolidation, but I do not think this will restrict your choice and you should be able to find a good combination of rate, fees and early repayment charges (ERC). 

You will also need to consider how you want to pay back the capital you will borrow. If you have investments that will provide sufficient funds to clear the mortgage debt you could consider an interest only mortgage, this will help keep the monthly payments down. 

If you don’t then you would probably be better taking a capital repayment mortgage where the capital is repaid month by month over the term of the mortgage. Whichever method you choose, you need to be aware that although the initial monthly cost of repaying your debt is decreased it is very possible that the total cost, capital plus interest plus charges could be a lot higher if you decide to consolidate the debts into one mortgage. 

Raising Funds Options 

To raise funds to consolidate debts, you have several options available: 

1. Home equity - as mentioned earlier, you can tap into the equity in your home through a remortgaging 
2. Personal loan - you can apply for a personal loan from a bank. Personal loans are unsecured, meaning you don't need collateral like your home. The interest rates may be higher compared to home equity options, but they typically offer fixed rates and terms, making it easier to budget for repayment 
3. Balance transfer credit card - if your debts primarily consist of credit card balances, you could consider transferring those balances to a credit card with a lower interest rate or a promotional 0% APR period. Be mindful of balance transfer fees and make sure you can pay off the balance before the promotional period ends, as the interest rate may increase significantly afterward  
4. Family and friends - you could consider borrowing money from family or friends, but make sure to approach this option with caution and transparency. Clearly outline repayment terms and stick to them to avoid straining relationships 

Before choosing a method to raise funds, carefully consider factors such as interest rates, fees, repayment terms, and potential risks. It's essential to have a clear plan for repaying the debt and to avoid taking on additional debt in the future. If you're unsure which option is best for you, you would benefit from speaking to one of our independent mortgage advisers. 

 Please call on 0330 433 2927 and they will be able to look at what you have been offered by your lender and be able to see if there was a better deal available elsewhere.