Debt Consolidation Mortgage: A Real-World Solution for Managing Multiple Debts and Home Expenses

Customer Overview

This case study focuses on a 57-year-old married professional from Kent, serving as an enforcement team leader with a household income of approximately £119,000 per annum (combined). The customer has multiple properties: their main residence and a second home previously rented out but now occupied by an adult son. The pressing concern was managing significant monthly mortgage payments alongside over £21,000 in credit card debt, all while facing rental issues and attempting to sell the secondary property.

Main Challenges Faced

• High unsecured debt: Around £21,500 in credit card balances leading to heavy monthly payments and interest charges.
• Unable to secure reliable tenants or sell the second property: The house remained on the market with two failed purchases, and extended vacancies meant ongoing financial strain.
• No longer eligible for buy-to-let remortgage: As the son (a family member) now resides in the property, lenders require it to be mortgaged as a second home, which involves stricter affordability assessments.
• High outgoings due to two mortgages: The main residence has a monthly payment of £3,180, and the second property (with Santander) is approximately £1,100 a month, leading to substantial financial pressure.
• Variable interest rates and lack of flexibility: Both mortgages are on variable or standard rates to avoid tie-ins, leading to unpredictability and missed opportunities for better deals.

The Debt Consolidation Remortgage Solution

Given the complexity of the situation, with the inability to treat the second property as buy-to-let, a standard debt consolidation remortgage was not possible. Still, several options and actions were explored:

• Secured loan proposal: The adviser explored the possibility of a second charge (secured) loan against the equity in the second property. This approach would keep the current Santander mortgage in place and raise an additional £60,000–£70,000 to clear the credit card debts and fund planned home improvements.
• Repayment scenario: Over a 10-year term, this loan would result in repayments estimated between £750 and £850 per month, based on prevailing rates for secured loans. This would be repaid on a capital and interest basis, offering a defined timeline to clear the debt.
• Affordability focus: The adviser checked affordability carefully, considering the main and secondary mortgage payments, ongoing bills, and required disposable income after clearing debt repayments.
• Credit check and pre-approval: A soft credit search confirmed there were no major issues, improving the chances of passing lender checks for the secured loan route.
• No early repayment charges on existing mortgage: Since the customer was on a variable rate with no tie-ins, they had flexibility in structuring any additional borrowing.

Results: Improved Financial Flexibility and Debt Management

• Potential to eliminate high-interest credit card debt: By consolidating unsecured debts into a single affordable loan secured against the property, the customer could save significantly on monthly interest and simplify their payment schedule.
• Stable monthly repayments: The secured loan option provided a clear, fixed repayment target, replacing variable and often higher credit card minimum payments with a more manageable figure around £750–£850.
• Increased breathing space to manage property sales or future rental opportunities: With debts consolidated and repayments predictable, the customer could afford to wait for a better sale or rental scenario.
• No early repayment penalties: Remaining on flexible mortgage terms left options open for switching or settling early if the second property sold.

Customer Testimonial:

“If we didn’t have to pay the repayments on those [credit cards], then we would have the funds to pay it [the new loan].” – Satisfied homeowner, Kent

Frequently Asked Questions (FAQs)

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

While actual savings depend on the rates and balances involved, consolidating £21,500 of high-interest credit card debt into a secured property loan could reduce monthly payments and total interest paid, often resulting in a lower, fixed monthly repayment.

Can you remortgage to fund home improvements?

Yes, raising extra funds through remortgage or a secured loan can be used for home improvements, provided it fits within lender affordability criteria.

Does remortgaging affect my credit score?

Applying for a remortgage or secured loan typically results in a soft or hard credit search, which may have a minor, temporary impact. Proper management of new payments can improve your score over time.

What documents are required for a remortgage application?

• Proof of income (payslips, tax returns)
• Identification (passport, driving license)
• Mortgage statements
• Evidence of ownership (property deeds if needed)
• Details of current liabilities (credit cards, loans)

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

Many fixed-rate mortgages carry early repayment charges. However, if you are on a standard variable rate with no tie-ins, as in this case, you can often repay in full or switch without penalties. Always check your lender’s terms and conditions for specifics.

Take Control of Your Finances with Smart Debt Consolidation

Are you struggling with multiple debts, juggling property costs, or seeking ways to consolidate and regain control? Our team of specialist mortgage advisers can help you explore debt consolidation mortgage options, secured loans, and property finance tailored to your needs. Contact us today for a free, no-obligation review and see how you can save money and reduce financial stress.