Remortgage to Pay Off Credit Card Debt

Straightforward mortgage advice from expert brokers. Finding the perfect mortgage just for you without the jargon. 

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Straightforward mortgage advice from expert brokers. Finding the perfect mortgage just for you without the jargon. 

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Remortgage to Pay Off Credit Card Debt, Vantage Mortgages

Remortgage to Pay Off Credit Card Debt

Adam Messer talks all about remortgaging with credit card debt.


Can I remortgage with credit card debt?

Yes – and it’s more and more popular these days and probably will continue to be in the future. There are usually some options to explore, which we’ll talk about in terms of whether you want to keep that credit card debt or not, but just having it there does not stop you getting a remortgage.

How does credit card debt affect a remortgage?

It does have an effect because getting a mortgage is all about affordability. Lenders look at your income and your outgoings and use the difference as your disposable income. That’s how they calculate how much mortgage you can afford to pay each month and how much you can borrow in total.

Your credit card debt has an effect because it’s a commitment. You have to make a monthly payment to reduce your credit card balance. Most lenders assume a monthly payment that’s a little bit more than the minimum payment. So credit cards can have a bigger effect on a mortgage than say a personal loan, because they’re generally going to allow for between 3% and 5% of the balance as a monthly payment.

Lenders assume a higher figure to allow it to be repaid, so it could affect how much you can borrow. We have sections on the website that talk more about affordability so do have a look at that.

My mortgage application was declined – what can I do?

Mortgage applications can be declined. So speak to a mortgage broker because we’ll be able to see why and what we can do about it.

Some lenders are much better than others when it comes to having debt in the background. The first thing is don’t panic. There will be a suitable lender for most people. So speak to your mortgage broker and I’m sure we’ll be able to get it sorted out, whatever it is.

How much can I remortgage for? Is there any difference if you’ve got credit card debt?

It depends on your individual circumstances. Just having a credit card doesn’t mean you can’t get a mortgage. It’s all about affordability, which will depend on income, your outgoings and your situation.

Things that make a difference include how your income is made up, if you’ve got children and if you’ve got other debt. Everyone is different and every lender is unique. So just speak to us and talk through your situation and we’ll be able to tell you how much you can remortgage for.

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

The most important thing is exactly what the balance is, so get a recent statement for that. The lender will see your credit card and any credit commitments on your credit file. So if you’ve got £5,000 on a credit card but you’ve just paid it off and then do a mortgage application, the lender won’t see that you’ve paid it off yet – it takes a month or so to update on your credit file.

We need to know what balance the lender is going to see. If you’ve paid it off we need to evidence that. If we can show a lender that it’s paid before the application, they can take a view on that.

Can I remortgage to pay off debts? What is a debt consolidation remortgage?

Yes, you absolutely can if you want to. We’ve got a whole section on consolidating debts on the website. Once you’ve listened to this podcast you can go and check that out. But debt consolidation is entirely possible.

It’s not available with every lender and every situation, but generally speaking yes, we can add loans and credit card debts to your mortgage. We have to be careful that it’s the right thing to do. I wouldn’t put a 0% credit card onto a mortgage because you’re going from paying no interest to paying interest.

You’re also securing it against your home, whereas your credit card is unsecured. Obviously you should make sure all your debts are paid because otherwise it can affect lending in the future.

But if you fall on hard times, and something has to give, your credit card is not secured on anything. The worst that’s going to happen is that the lender will default you. While that’s unfortunate, you’re not going to lose your home. But if you don’t pay your mortgage, you could lose your home.

That’s the big thing to remember about consolidating debt. It’s not right for everyone. But in theory it can be done – you can add debts on to your mortgage – loans or credit cards and anything like that.

Here’s an interesting fact for you. Lenders don’t count it as debt consolidation if it’s a part of a purchase. So if you’re selling and buying a new house but keeping some equity back to repay some debts, we don’t count that as debt consolidation. I’ve always found that odd, but it’s true.

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Can you consolidate debt twice?

Technically, you can do what you like, but we shouldn’t really be doing that because you can get into this vicious circle. If we remortgage every two or five years and each time you’ve built up some debt and we add it onto the mortgage, you’re never going to pay your mortgage off. We really don’t advise you to do that. No-one’s going to stop you, but it’s not advisable.

It’s also good to think about the debt we’re consolidating. I know we’re talking about credit cards specifically here, but if the loans and debts are for home improvements that can be different.

Let’s say you’ve added an extension or a conservatory, a new kitchen or bathroom – that’s going to have added value to your home. Adding that kind of debt to your mortgage is no problem at all. We wouldn’t think twice about that.

Debts for things like cars, holidays and weddings can be a contentious subject. Obviously your wedding day is a big day – but is it worth securing it on your home? And your new car or holidays will be long forgotten by the time you finally pay off your mortgage.

If you change your car every few years but add that debt onto the mortgage, you won’t even be close to repaying that debt by the time you want a new car again. So it’s not advisable to add that kind of debt onto your property.

What are the eligibility criteria for a remortgage for debt consolidation?

It’s mostly about affordability. Can you afford to borrow extra to add on the debts you have? Is there enough equity in the property?

Not all lenders like to do mortgages for debt consolidation. The ones that do tend to limit it to a certain percentage of the property’s value. We might struggle to get over 80% to 85% of the property value. Other lenders may go up to 90%, but mostly they don’t like taking your mortgage too high.

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

This is interesting. You wouldn’t think it would make any difference, would you? But it actually does from an affordability point of view.

It goes back to what I was saying at the start about the lender taking into account a certain percentage of your debt – and especially the lenders that look at 5% of your credit card balance.

Let’s say ah you’ve got £5,000 on a credit card. If the lender is going to take 5% of that as a monthly payment, that’s £250 a month. But you might have a £5,000 personal loan over five years at less than £100 a month.

That’s going to make quite a big difference to your affordability. Owing the same amount on a personal loan over a longer period of time gives you a much lower monthly payment. So ultimately, yes, it’s better to get a personal loan than a credit card.

The other thing with a credit card is that you can always borrow more on it. I’ve seen people that always have something on the credit card and never ever pay it off. With a personal loan, in the end it’s repaid.

How can a mortgage broker help if somebody is looking to remortgage with credit card debt?

Well, Martin Lewis says mortgage brokers are worth their weight in gold, because we know which lenders to go to. We know the criteria. If you need to do debt consolidation or you’ve got a credit card, I know which lenders will be best for you and which ones to avoid.

You can’t find that by comparing meerkats. And if you talk to your existing lender, they’re only going to tell you about their criteria. So having a full view of the whole industry and the market will make sure that you get the most suitable option for your individual situation.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up with your mortgage repayments.

You may have to pay an early repayment charge to your existing lender if you remortgage.