Best Mortgages Bad Credit Uk

Debt Consolidation Mortgage - Will It Be Your Friend Or Foe?
By IC

Only a few years ago, the prospect of a debt consolidation mortgage was often hailed as the way forward. And it’s clear to see why. Homeowners were getting in to increasing unsecured debt – in 2007, all debt in the UK (around £135tr) exceeded GDP for the first time (around £133tr) – while interest rates were temptingly low. In October 2003 for example, the base rate stood at just 3.5 per cent. As a result, many homeowners were persuaded to borrow more of this cheap money against their homes – which of course were rocketing in value – and pay off more expensive unsecured debt like credit cards. This became known as a debt consolidation mortgage.

How does a debt consolidation mortgage work?
But, really a debt consolidation mortgage is just another name for a remortgage or a further advance. The reference to ‘debt consolidation’ is simply what the homeowner does with the money released. A remortgage means when you switch lenders and increase your borrowing in the process, whereas a further advance means sticking with the same lender and deal but borrowing more against your property. Either of these types of further borrowing is widely referred to as a debt consolidation mortgage.

What are the pros of a debt consolidation mortgage?
A debt consolidation mortgage is very useful in terms of the fact it keeps all of your borrowing in one place. This means there are fewer Direct Debits to organise or fewer repayments to miss as, clearly, you have fewer creditors. Another bonus of a debt consolidation mortgage is that, while mortgages rates are not as low as they once were, they are still a lot cheaper than the rates payable on credit cards, store cards, overdrafts and personal loans. This means that your debt consolidation mortgage will leave you safe in the knowledge you will not be paying eye-watering rates of up to 30 per cent APR on any borrowing.

What are the cons of a debt consolidation mortgage?
However, equally there are some downsides to a debt consolidation mortgage. The first one is that the one new loan you have secured against your home, is payable over a longer period than the five-year term of a personal loan for example, meaning that what you save in the rate of interest, you may pay anyway in the length of time the debt consolidation mortgage runs for.

The other downside to a debt consolidation mortgage is that, when you   [This article related to Best Mortgages Bad Credit Uk continues below...]

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