Remortgaging Guide
Remortgaging to Reduce Monthly Outgoings:A Step-by-Step Guide
A clear, practical walkthrough for UK homeowners considering a debt consolidation remortgage.
If you feel like you are spinning too many plates with credit cards, car finance, and personal loans, you are not alone. Many homeowners in the UK are looking for ways to simplify their finances and reduce the pressure on their monthly budget.
One effective strategy is a debt consolidation remortgage. By using the equity in your home to pay off high-interest debts, you can roll everything into one single, more manageable mortgage payment.
Here is our step-by-step guide to how the process works and how to get started.
Assess Your Current Debts
Before making any moves, get a clear picture of what you owe. Make a list of every credit card, store card, and loan. For each one, note:
- The current outstanding balance.
- The interest rate (APR).
- The monthly payment.
- Any early repayment charges (ERCs) for paying the loan off early.
Check Your Home Equity
Equity is the portion of your home that you truly own - the difference between your home's current market value and your remaining mortgage balance. To consolidate debt, you typically need enough equity to cover the extra borrowing.
Tip: You can get a rough idea of your home's value using online valuation tools, though a lender will eventually require a professional valuation.
Speak to a CeMAP Qualified Adviser
Remortgaging to consolidate debt is a significant financial decision. At CHFinance, our expert advisers will look at your specific case to see if this is truly the most cost-effective path for you. We have access to broker-only deals and specialist lenders that you will not find on the high street.
The Agreement in Principle (AIP)
Your adviser will help you secure an Agreement in Principle. This is a document from a lender stating how much they are likely to let you borrow based on a soft credit check, which will not impact your credit score.
Formal Application and Valuation
Once you have chosen a deal, we handle the heavy lifting by submitting the formal application. The lender will then:
- Perform a hard credit check.
- Verify your income and outgoings.
- Conduct a professional valuation of your property.
Legal Work and Completion
A solicitor or conveyancer will handle the legal transfer of the mortgage. When everything is approved, the new mortgage funds are used to pay off your existing mortgage and your other high-interest debts. You are then left with one single monthly payment.
Is it Right for You? Key Considerations
While the goal is to reduce your monthly outgoings, it is important to understand the trade-offs:
- Secured vs. Unsecured: You are moving unsecured debt (like credit cards) onto a loan secured against your home.
- Total Cost over Time: Even if your monthly payment is lower, spreading debt over a 25-year mortgage term may mean you pay more in total interest over the long run.
- Fees: Be sure to factor in arrangement fees, legal costs, and any exit fees from your current lender.
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