Smart Remortgage Moves: How One Homeowner Used a Debt Consolidation Mortgage to Fund Home Improvements

In today’s challenging economic climate, many homeowners are juggling multiple financial responsibilities—from rising living costs to credit card repayments—while trying to improve their homes. For one homeowner in the UK, the need to fund a property extension and reduce financial pressure led to a well-thought-out strategy: a debt consolidation mortgage.

Customer Overview

This case involves a woman in her early 40s living in the UK. A working mother who recently remarried, she’s been navigating personal and financial challenges alone for some time. Following her father’s passing and the responsibility of raising her son, she took on several financial obligations that gradually accumulated, particularly in the form of high-interest credit card debts. Despite having savings, she aimed to protect her financial buffer and sought a solution that wouldn’t disrupt her monthly finances.

The Challenge: Balancing Debt with Home Improvement Goals

This homeowner’s primary goal was to secure a ‘top-up’ on her mortgage to finish a property extension project. However, her credit profile had also become weighed down by over £16,900 in high-interest credit card debts. The dual challenge—securing funds for her home extension and reducing monthly outgoings—compounded the issue. With income and expenditure assessments showing higher outgoings than income, changes were crucial to regain financial control.

Debts to be Consolidated

• MBNA Credit Card: £6,542 at 30% interest
• PayPal Credit Card: £2,493 at 24% interest
• Tesco Credit Card: £2,258 at 30% interest
• Virgin Money Credit Card: £4,801 at 28% interest
• Next Mail Order: £898 at 25% interest

Monthly payments on these debts totaled £612 while paying mostly interest, with little impact on the balances.

The Solution: A Debt Consolidation Mortgage

The homeowner opted for a remortgage to consolidate debt. This allowed her to roll high-interest debts into her mortgage while extracting enough equity to complete the home extension. She was advised of the increase in overall repayment cost—£2.24 for every £1 borrowed, totaling around £38,062.08 over the life of the mortgage. Still, the reduced monthly outgoings and one consolidated payment made the financial strategy more manageable in the short term.

Despite professional advice against consolidating commitments with less than two years left, she chose to consolidate even a low-balance card due to its high 24.90% interest rate. She was also advised about the risks of converting unsecured debts into a secured mortgage, especially the long-term cost implications. Yet for her, the immediate benefits outweighed the downsides.

Why Debt Consolidation Made Sense for Her

• High-interest debts were dramatically increasing the cost of borrowing
• Only interest was being paid monthly—balances remained largely untouched
• Her savings were limited and earmarked for emergency use
• Her financial situation had improved due to life circumstances (e.g., remarriage)

Outcomes and Benefits Achieved

By choosing a debt consolidation mortgage, the homeowner:

• Unlocked equity to complete her home extension
• Reduced monthly outgoings by approximately £368.25
• Replaced five monthly debt payments with one streamlined mortgage payment
• Gained improved financial breathing room and peace of mind

“Now that I’ve taken care of the high-interest cards and can finish the extension, my monthly budget finally feels manageable again,” she noted after signing the agreement.

Frequently Asked Questions

How much can I save monthly by consolidating credit card debts into a mortgage?

In this case, the homeowner saved approximately £368.25 per month by consolidating high-interest debts into her mortgage, freeing up disposable income.

Can you remortgage to fund home improvements?

Yes. In this instance, the homeowner remortgaged to free up equity for a home extension while also consolidating debt to avoid impacting monthly cash flow.

Does remortgaging affect my credit score?

It can have a temporary impact due to credit checks and changes in your credit file. However, making consistent mortgage payments on time may improve your score over time.

What documents are required for a remortgage application?

You’ll typically need identification, proof of income (payslips, bank statements), details of any current debts, and information about your current mortgage.

Can I repay a fixed-rate mortgage early without penalties?

Most fixed-rate mortgages include an early repayment charge (ERC). Always check your mortgage terms or consult your lender before making extra payments.

Is a Debt Consolidation Mortgage Right for You?

If you’re struggling with multiple high-interest credit cards and need to fund a home project, remortgaging to clear debt and unlock equity could be the solution. Just like this homeowner, you can reduce monthly outgoings and simplify your finances—though it’s critical to be aware of the long-term cost.

Considering Your Options?

Use our remortgage calculator to see how much you could save. Or, speak with one of our specialists to explore debt consolidation remortgage solutions tailored to you.

Let’s take the next step together. Contact us today for a free, no-obligation consultation.