Debt Consolidation Remortgage
Consolidating bills by re-mortgaging can provide a great savings on your monthly expenses. By doing a debt consolidation re-mortgage there are certain pros and cons to be aware of. While the advantages seem to far outweigh the disadvantages of debt consolidation by way of remortgage, they still need to be taken into account so you can make a proper decision.
The first thing that needs to be considered when thinking about doing a remortgage for consolidating bills is the equity in your home. The more equity that is present, the more that you will be able to borrow, and the more bills that will be able to be paid off.
Another thing that has to be thought about is whether to use your present lender as your remortgaging source, or if you can get a better rate by remortgaging through another company.
Lets look at the basic pros and cons for a debt consolidation remortgage, and then we can get into more detail.
Advantages Of A Debt Consolidation Remortgage
- Lower monthly payments
- Lower interest rate
- Less creditors
- Only one easy monthly payment
Disadvantages Of A Debt Consolidation Remortgage
- Longer term/Longer time making payments
- Home is used as collateral
- Fees associated with remortgaging
Examining The Pros Of Debt Consolidation Remortgage
Someone who has many credit card bills, as well as personal loans or other types of payments that need to be made on a monthly basis, will likely see some great benefits to a debt consolidation remortgage. By paying off existing credit card debt and other loans by remortgaging, the monthly payment that needs to be made will likely be much lower than the total that is being paid prior to the remortgage. For example, instead of paying a total of 500 pounds a month for five or six different creditors, doing a remortgage could result in only having a monthly payment of 250 pounds per month, thus meaning you will be paying 250 pounds less per month.
Many credit cards and other types of loans also have much higher interest rates. It could be possible to get remortgaged at 5 percent, and even at a rate of 7 or 8 percent the interest rate will be much lower than what you are paying your current creditors.
Doing a debt consolidation remortgage means your other creditors will all be paid in full. This means instead of paying two, three, four, or more different creditors, you will now only have to make a single monthly payment.
Examining The Cons of A Debt Consolidation Remortgage
While you may now have less creditors and be paying a lower interest rate, you will also be paying back the amount owed over a longer period of time.
Also, this new debt will now be secured by your home, meaning if you don’t repay the loan, you could lose your house.
There are also fees that could be included in the remortgage, such as redemption penalties, legal fees, arrangement fees, and survey fees. However, there are many remortgaging companies that will waive most or all of these fees if you decide to remortgage with them. That is why it is recommended to shop around for a remortgage lender, as you can save quite a bit of money by having these fees excluded from your loan.