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Debt Consolidation
You could arrange your finances so that borrowing which attracts a high
interest rate, such as store card or credit card balances, is incorporated
into your existing mortgage, a process known as ‘consolidating your
debts’.
If you bought your property some time ago it’s almost certainly worth more
than you paid for it.
You could use the equity, or extra cash value invested in your home to pay
for home improvements or pay off other, more expensive debts and loans.
This is known as re-mortgaging, and the loan taken out would be repaid in
the same way as a traditional mortgage.
A basic formula for estimating the potential equity you have in your home
is to subtract the value of your existing mortgage, plus any loans secured
on your home, from the current value of the property. This figure would
represent the maximum potential equity present in your property. You
should always remember that the lender is likely to take into account your
financial commitments, such as regular outgoings and expenses, before
assessing how much you could afford to borrow.
Please
note:
This form of debt consolidation will invariably reduce your monthly
expenditure in the short term, but it is also likely, over the whole term
of a mortgage, to result in a higher total charge for credit.
You should think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your
mortgage. Transferring unsecured loans to a secured loan (i.e. a
remortgage) may increase the risk of your home being repossessed in the
event of a failure to maintain mortgage repayments.
The amount you could borrow and the cost of your repayments will depend
upon your current circumstances, the term in years over which the loan
would be repaid, and the type of product and interest rate selected.
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