There are positive steps you can take to reduce your monthly outgoings. One such way is debt consolidation.
If you are juggling costly unsecured borrowing (on store or credit cards for example), it is likely that you will be paying significantly more interest, and therefore higher monthly payments than if you were to consolidate your borrowing into one secured loan.
When you consolidate debt, not only can you reduce your monthly outgoings, but you can also put in place an achievable plan to pay back whatever you owe.
How does a debt consolidation mortgage work? Typically, you take out a mortgage that is large enough to pay off an existing mortgage, whilst also covering any other existing debts. There are two main options: Remortgage or Second Charge Mortgage.
A re-mortgage allows you to switch your existing mortgage and any other outstanding debt to a new deal. This could either be with your existing lender or a new provider. The new mortgage is secured against your existing property.
• Reduces your outgoings to one monthly commitment, making it easier to budget.
• Provides better rates than on standard loans/credit cards etc., helping you to pay off your debts quicker.
• Whilst a re-mortgage could save you money each month, you may have to pay charges and fees to both your existing and new lender.
• However, Mortgage Pursuit can help with this – as a ‘whole of market’ mortgage broker, we can assess every available product and recommend the best possible solution for your requirements.
2. Second Charge Mortgage
A second charge mortgage, also known as a ‘secured loan,’ works just like a normal mortgage, in that it is secured against your current property. However, the loan is granted by a different lender, on different terms. This gives you the freedom to secure the best deal, without changing your existing mortgage provider.
• Second charge lenders tend to be more flexible, which can be beneficial in certain situations, for example, some lenders may be prepared to offer a higher maximum loan amount or consider individuals with a poorer credit rating.
• If you have a great deal on your current mortgage and want to keep it, a second charge will not impact on this.
• Second charge mortgages tend to incur higher rates than traditional mortgages, so you may end up paying more than if you opted for a re-mortgage.
• You may also have to pay a slightly higher arrangement fee to the provider.
• Please be aware that when you consolidate debt, it is transferred from unsecured to secured debt. Your home may be at risk if you fail to keep up repayments on a mortgage or other debt secured against it. You should also consider that whilst spreading your debt over a longer period will save money each month, you may end up repaying a higher total amount.
With a quick call to Mortgage Pursuit, we can help you get your finances back on track.