One attractive feature of taking out a remortgage is the ability to consolidate your various debts and debt interest payments in one place. To significantly reduce your financial pressure you should first start by looking at how much you owe and then see whether you can get a good re mortgage deal which will enable you to have the smallest interest rate possible for your whole loans. These are the various things to consider when remortgaging for debt consolidation.
- Write Down a list of all your various debts. This can include, credit card debt, personal loans, store credit cards, student loans, and mortgage debt. Also write down the interest rate on each loan and calculate your annual interest payments on these loans.
- It is likely that the interest rate on other loans will be much higher than for a typical mortgage loan. Credit Card and Store Card loans can attract an interest rate of upto 20% and more. These kind of loans should be the first you should try and pay off.
- Find out how much you are able to borrow from different mortgage dealers. If your house price has risen in value (which it should have done in the UK) you should be able to borrow more than your existing mortgage.
- If your existing building society says that they can not increase the existing mortgage size the look around. Try to find a mortgage dealer who looks at affordability rather than income multiples. Hopefully this should enable you to get a remortgage which enables you to cover your existing mortgage plus an additional sum (e.g. £10,000) this can then be used to pay off your other debts that can attract a high interest payments. Don’t be tempted to spend the extra equity.
- If you go for a 100% mortgage you may find the interest rate becomes higher. Also you may have to pay an additional charge which is like an insurance for the mortgage dealer in case you default. Therefore if possible try to avoid these 100% or 125% mortgages. However it may well be better than paying the existing high fees.
Look at the small print of any remortgage quote to examine any hidden fees, charges, or early exit fees. A good broker should point these out.
By: R.Pettinger 07/02/2007