Debt Consolidation and Remortgages

17 September 2008
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Short term debt up to a maximum of 10% of the mortgage may be added to a new mortgage.

Debt consolidation is used by individuals who wish to amalgamate existing mortgages and other short term debt into one new loan

Mortgages are among the cheapest forms of credit available because the loan is secured on your home.

The danger in debt consolidation is that, despite the lower rate of interest on the consolidated loan, you can end up paying more because the new loan lasts much longer than the original loans.

Another danger is that old habits die hard and instead of sticking to your new single debt repayment, too many people actually start borrowing short term again and wind up in the same position a number of years later.

The golden rule is to keep unsecured debt to a minimum .

For instance, a typical car or personal loan is repaid over a three to five-year period. If you consolidate this into a 20-year mortgage, the longer term means that although your monthly repayments are lower, you will pay far more in interest over the life of the loan.

Some of our mortgage lenders offer flexible repayment arrangements so that the personal loan portion of the new consolidated loan can be paid off within the original term, but at the lower rate of interest.

Please remember that the new, larger loan is secured on your home and if you fail to make payments, your home could be at risk.