Remortgage with credit card debt

Podcast approved by Openwork on 25/02/2025

Lee McAteer explains how a remortgage with credit card debt works.

What is a debt consolidation remortgage?

A debt consolidation remortgage is a process where you’re refinancing some debts and adding them onto your existing mortgage, by borrowing additional funds. These are generally unsecured debts like credit cards, personal loans or overdrafts – and then you’re adding them onto your mortgage.

You would be moving away from a higher rate of interest and putting the debt onto your mortgage at a lower rate of interest.

Can I remortgage with credit card debt?

Yes, you can absolutely do that. It just depends on the lender you’re looking to go to, and your income and affordability at that time. Some lenders may restrict the amount of unsecured debt you can put onto the mortgage. That’s something to consider, but a broker will know where to go for you.

How does credit card debts affect a remortgage? How will credit card debts affect my mortgage application?

Having high levels of credit card debt can impact your ability to get a remortgage at a high Loan to Value. If, for instance, the debt that you’re adding on will take you to 90% or above, that can be challenging with some lenders. Some will only go up to 75% Loan to Value. Others will go above that, but you’re reducing the options available.

As part of the affordability checks, lenders will scrutinise your income in more detail if you’re adding unsecured debt onto your mortgage. They will also look at your credit score – missed payments or high credit utilisation can impact your ability to to remortgage.

What are the eligibility criteria to remortgage for debt consolidation?

The main things are your income and employment stability. As long as you can prove your income and you’ve got a track record of employment, that will make it easier to be accepted with lenders.

Loan to Value is also important. If we’re not going right up to 90% or 95% of the property’s value to consolidate the debts, that again will make it easier.

Past credit history is a factor as well. Lenders want to check you have been able to service the debts before you look to consolidate that again. Clean credit will give you more options.

My mortgage application was declined, what can I do?

First of all, I’d say speak to a broker and we’ll find out the reason why that may have happened. That includes reviewing your credit file to see if there are events there you weren’t aware of.

It may help to reduce some of the debt if you’re looking to reapply again. Try and pay down some of the credit cards or loans – and obviously try different lenders by speaking to a broker.

Also, second charge options may be an alternative. If you’re unable to change lenders or if you’ve got a mortgage at a favourable rate and you don’t want to leave that, you could look at a second charge.

How much can I remortgage for?

It just depends on the overall value of your property and how much you’re looking to remortgage up to. Your income and affordability would dictate how much you’re going to be able to borrow, alongside your credit score and existing debts.

A few different factors will be taken into account which would then influence how much you’d be able to remortgage for.

What are the key things to know when remortgaging with credit card debt?

The advantages of consolidation are that you’ll generally get lower interest rates compared to credit cards. Adding them to a mortgage also simplifies your monthly payments. All your debts are in one single payment, which potentially lowers your outgoings.

On the flip side, the disadvantage is a longer repayment period. You’re potentially taking that debt over 30, 35 or even 40 years. Also, you’re adding unsecured debt onto your home, so if you’re unable to meet those payments, you’re putting your home at risk. You wouldn’t be doing that if they were still unsecured.

There’s also the potential for repeat borrowing. If you keep using credit cards, you might face the same issues again. We don’t want to remortgage for debt consolidation, and then in two or five years’ time when your remortgage is up, those debts have been racked up again. You’ve already used the equity in your property to pay off your debt.

You’ve just got to be careful and sensible if you want to consolidate debts and add them onto your property.

Can you consolidate credit card debt twice?

You can, but serial debt consolidation may indicate affordability issues. If you’ve consolidated the debts and then racked it all up again, it may be harder to secure a new deal going forward. But if there are good reasons why these debts have been built up, you can potentially do it for a second time.

Is it better to have a personal loan or credit card debt when remortgaging?

A personal loan has fixed repayments and it’s structured, and so that may make affordability calculations easier.

With credit card debt, while initially it may start at 0%, unless you switch your balance to another 0% card, the monthly interest you’re paying can spiral. Because of that, credit card debts are generally not as favourable when you’re remortgaging.

There are lenders that will consider what you have outstanding today. If you’re going to be paying that off with a remortgage, it can be removed from affordability. But that’s not all lenders – some will assume that you may not pay it off and will still factor it in the affordability. It just depends which lender you’re looking to proceed with.

What else do we need to know about a remortgage with credit card debt?

If you are looking to consolidate debt, speak to a broker – because we can compare multiple lenders and products. We will guide you and help you improve your application by getting all the relevant documents in place.

We also help you navigate the affordability rules – because the criteria is so different with each lender. Certain banks we deal with only let you consolidate £15,000, while with others it’s £50,000. A few are unlimited. So to get the right option for you, speak to a broker who’s got experience with consolidation of debts – and that will put you on the right path.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by Openwork on 25/02/2025