We've rebranded! Formerly known as Green Mortgages
We've rebranded! Formerly known as Green Mortgages
When your fixed rate is coming to an end, you naturally start paying attention to your mortgage again. You compare new deals, work out what your payments could look like and take stock of the wider household finances. For many homeowners, that is also when a question comes up: could the credit cards and loans built up in the meantime be rolled into the mortgage?
It is a fair question, and renewal can be a sensible time to explore it. You are reviewing the mortgage anyway and may be moving to a new lender. Folding other borrowing into the mortgage is a form of debt consolidation. However, one important distinction catches many people out before they even reach the figures.
This guide explains whether you can add debt to your mortgage at renewal, why the route you choose matters, and the costs and risks to weigh up first.
Yes, potentially. When your fixed rate ends, you may be able to add debt through a remortgage or, in some cases, a separate further advance from your existing lender. What you cannot normally do is raise extra money through a standard product transfer alone.
Adding debt increases the size of your mortgage, so the extra borrowing must be assessed and underwritten. The options available at renewal can look similar, but they work very differently when you want to raise money.
At renewal, the two main routes are a product transfer and a remortgage. Both can give you a new rate, but only a route that includes additional borrowing can release money to repay other debts.
A product transfer keeps you with your current lender and moves your existing mortgage balance onto one of its new rates. It is usually quick, with little paperwork and often no valuation. However, a standard product transfer normally covers only the balance you already owe. If you simply accept a new rate, you will not usually be borrowing extra at the same time.
A full remortgage can include additional borrowing. You take out a new mortgage for more than your current balance and use the difference to repay the agreed credit cards or loans. If consolidation is part of the plan, it is best to consider it before committing to a straightforward rate switch.
There is also a middle option if you would rather stay with your current lender. A further advance is separate borrowing secured against your home, on top of the main mortgage. The extra amount is assessed and priced separately, so it may sit on a different rate and deal period.
A further advance can suit someone who wants to remain with the same lender. At renewal, though, it is still worth comparing it with a full remortgage that combines the borrowing into one balance.
Renewal can be a useful time to consolidate because your early repayment charge may be coming to an end. Leaving a fixed deal early will often trigger a charge based on the mortgage balance, which can run into thousands of pounds and reduce or wipe out the benefit of moving.
By arranging the remortgage to complete when the fixed deal and any early repayment charge period end, you may avoid that penalty. The exact date matters, so it should be checked against the terms of your current mortgage.
Start the review early rather than waiting for the rate to expire. Many lenders allow a new mortgage to be arranged several months ahead, often up to six months, although the exact window varies. Looking early gives you time to compare the full cost and plan the completion date properly.
The process follows a normal remortgage, but the amount requested includes the debts you want to clear. First, you work out the available equity and check whether the extra borrowing fits within the lender’s loan-to-value limit. You then apply for the larger mortgage and state how much is being raised for consolidation. Once the remortgage completes, the agreed funds are used to repay the relevant balances. Our guide to the debt consolidation mortgage application process explains each stage, and it is also worth checking how much debt is too much to consolidate before settling on a figure.
The immediate appeal is usually the monthly saving. Moving unsecured debt onto a mortgage can reduce your monthly outgoings, sometimes significantly, because the balance is spread over a longer term and may be charged at a lower rate. One recent Proper Advice client reduced their monthly outgoings by £512 this way.
The trade-off comes later. A debt you might have cleared in three or four years could remain within the mortgage for 20 or 25 years. Even at a lower rate, that longer term may mean paying more interest overall. Whether it saves you money depends on your own figures, so compare the total cost rather than focusing on the monthly saving alone. Our guide looks at whether consolidation really saves you money.
Before deciding, put the monthly and long-term figures side by side. Our debt consolidation calculator shows how your monthly outgoings could change if you fold debts into the mortgage and helps you compare the immediate saving with the cost over the full term. That gives you a clearer starting point for a conversation with an adviser.
Benefits
Risks
Because adding debt is new borrowing, the lender will carry out a full assessment. It will look at your income and outgoings, credit history, debt-to-income ratio and the proposed loan-to-value. The larger mortgage must remain affordable under that lender’s criteria. Replacing several commitments with one lower monthly payment may help the affordability picture, but the treatment varies between lenders. They may also consider how the debts arose and whether you have consolidated before.
It can make sense when you have enough equity, the debts carry high interest rates and the timing coincides with the end of your fixed deal. It may be less suitable when the debts are close to being repaid, the total interest would rise sharply, the extra borrowing would leave little equity, or the spending pattern behind the debt has not changed. In those cases, compare the alternatives before deciding.
At Proper Advice, we work with over 90 high street and specialist lenders. We can compare a remortgage, a product transfer and any further advance options to see which route best fits your circumstances. There is no sense adding debt to your mortgage unless both the monthly and long-term figures stack up.
To discuss your options, fill out our contact form, call 01244 955 399 or email info@properadvice.co.uk.
Not through a standard product transfer alone. A product transfer normally moves your existing balance onto a new rate with the same lender and does not include extra borrowing. To add debt, you would generally need a remortgage or a separate further advance, both subject to assessment and underwriting.
Completing when your fixed rate and any early repayment charge period end may make the move cheaper than remortgaging partway through a fixed deal. However, that does not mean consolidation will be cheaper overall. The answer depends on the interest rates, fees and repayment term, so compare the total amount repayable as well as the monthly cost.
Many lenders allow a new mortgage to be arranged up to six months before the current deal ends, although the exact window varies. Starting a few months ahead gives you time to compare lenders, complete the assessment and plan completion around the end of any early repayment charge period.
It can. Additional borrowing raises the mortgage balance and may increase your loan-to-value. If that moves you into a higher loan-to-value band, the available rate could be higher than it would have been on the existing balance alone. Retaining more equity may help you remain in a lower band.
Think carefully before securing other debts against your home. The overall cost of repayment of other debts might be more when added to your mortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
