A realistic example
Consider a homeowner with £10,000 of unsecured debt spread across credit cards and personal loans.
Option 1 – Debt consolidation remortgage
The homeowner increases their mortgage by £10,000 at an interest rate of 3% over a 20-year term.
- Monthly increase: approximately £55
- Interest portion of payments: around £25 per month
Over 20 years:
- £25 per month × 12 months × 20 years = £6,000 in interest
Option 2 – Personal loan
Alternatively, the homeowner takes out a £10,000 personal loan over 5 years at 4.5% APR.
- Monthly payment: approximately £186
- Total interest payable: around £1,161
Although the monthly payment is higher, the debt is cleared much sooner and at a far lower overall cost.
The real cost difference
In this example, consolidating the debt into the mortgage would cost approximately £4,839 more in interest over time — assuming competitive remortgage rates remain available in the future.
That highlights the main risk of debt consolidation remortgages: lower monthly payments often come at the expense of significantly higher long-term costs.
When debt consolidation might make sense
Despite the risks, there are situations where a debt consolidation remortgage may be appropriate:
- When monthly repayments have become unmanageable
- When high-interest debts are causing financial stress
- When alternative lending options are no longer available
In these cases, improving short-term affordability can help stabilise finances — provided the risks are clearly understood.
Important risks to consider
- You are securing previously unsecured debt against your home
- Debts are repaid over a much longer period
- Total interest paid is usually significantly higher
- Early Repayment Charges may apply on your existing mortgage
If you fail to maintain repayments, your home could be at risk.
Alternatives worth exploring
A debt consolidation remortgage is not the only option.
- Personal loans or balance transfer products
- Negotiating reduced payments with creditors
- Independent debt advice services
Free, impartial debt advice is available from organisations such as the Money Advice Service, which can help you explore non-mortgage solutions before committing to long-term secured borrowing.
Why advice matters
Debt consolidation should never be rushed or treated as a default solution.
A mortgage broker can:
- Assess whether consolidation is suitable in your circumstances
- Compare mortgage and non-mortgage options
- Explain long-term costs clearly and transparently
The right decision is the one that improves your overall financial position — not just your monthly payment.
If you’re considering a debt consolidation remortgage, professional advice is essential.
Our advisers can review your circumstances and help you decide whether consolidation is appropriate — or whether alternative solutions may be better suited.