Remortgage to Clear Debt and Fund Home Improvements: A Smart Financial Move

Customer Overview

A middle-aged professional based in the South of England was seeking a way to take control of his finances after a change in personal circumstances. Recently separated, he wished to remove his ex-partner from the mortgage, secure a long-term fixed interest rate, raise capital for home renovations, and reduce monthly outgoings to a comfortable level—all despite facing challenges from a complex credit history when considering options like Pepper for remortgaging and debt consolidation.

Challenges Faced

The customer previously held a mortgage with Kensington at a variable rate. His goals were threefold:

• Secure a stable, longer-term fixed rate mortgage
• Consolidate an existing mortgage and raise £35,000 for home improvements
• Remove his ex-spouse from the property while managing affordability

However, the biggest hurdle was his credit status, which had some recent adverse marks, limiting the options among mainstream lenders. Extending the mortgage term also posed considerations regarding long-term interest costs versus monthly affordability, not unlike how Pepper could tackle remortgaging challenges.

Our Remortgage Solution

After a comprehensive fact-find and review of the market, we sourced a solution that met every requirement. We recommended a remortgage through Pepper (UK) Limited, a specialist lender experienced in working with customers with complex credit profiles. Here’s how we tailored the remortgage:

• Loan Amount: £80,122 — included funds to clear the existing mortgage and raise £35,000 for renovations.
• Loan Term: 28 years — extended to reduce monthly payments within the customer’s £500 target budget.
• Rate: 5-year fixed at 6.75% — offering stability and avoiding the need to refinance amid credit repair.
• Monthly Payment: £531 — significantly lower than £843/month on a shorter term.
• All fees covered: No arrangement, legal, valuation, or survey fees.

The customer opted for a repayment (capital and interest) mortgage for peace of mind, ensuring the mortgage would be fully cleared at the end of the term. Given his plans to remain in the property long-term and gradually improve his credit, a 5-year fix was the ideal choice.

Why Pepper Was the Right Choice

Many high street lenders—including Halifax, Barclays, HSBC, and Nationwide—would not consider the application due to recent adverse credit. Pepper offered a practical and inclusive route forward without compromising on services, such as free legals and fast completion options, making it an effective solution for remortgaging and potentially consolidating debt.

Results and Benefits

• Debt Simplification: Combined debt and home improvement capital into one manageable payment.
• Financial Stability: Locked into a 5-year fixed rate, protected from potential rate hikes.
• Improved Affordability: Monthly mortgage payment secured at £531, avoiding financial strain.
• Property Enhancement: Access to £35,000 for valuable home upgrades.

“I knew a two-year fixed would put me right back in the same position before my credit’s strong again. The five-year fix gives me peace of mind while I rebuild and get things sorted.”

FAQs

Can you remortgage to consolidate debt and fund home improvements?

Yes, many specialist lenders allow you to raise capital during a remortgage, either to pay off existing credit or fund improvements. However, affordability, equity, and credit history all influence eligibility. Pepper’s remortgage debt consolidation options might serve as a suitable example.

How much can I save monthly by extending the mortgage term?

In this example, extending the term from 11 years to 28 years reduced the monthly payment from £843 to £531—a saving of £312/month. However, longer terms may lead to higher interest payments overall.

Does remortgaging impact my credit score?

Initially, applying for a remortgage involves credit checks which may cause a temporary dip. However, responsible repayments on a new mortgage can improve your score over time, especially if you consolidate unsecured debts.

What documents are required for a remortgage application?

Typical documents include proof of income (e.g., payslips, SA302s for self-employed), bank statements, existing mortgage statements, ID, and credit reports.

Can I repay a fixed-rate mortgage early?

Yes, but early repayment may incur fees. In this case, the fees ranged from 4% in year one to 2% in year five. Check your ESIS document for specifics on your plan.

Take Control of Your Finances with a Tailored Remortgage

If you’re exploring a remortgage to clear debt or raise funds for home improvements—even with previous credit hurdles—a specialist solution may be available for you. Let our expert advisors compare the market and guide you to the best choice for your future.

Contact us today for a free, no-obligation consultation and start reshaping your financial freedom.