Debt Consolidation Mortgages, Remortgage to Clear Debts

What is a debt consolidation mortgage?

A debt consolidation mortgage is a regulated mortgage or second charge loan in which some or all of the money borrowed is used to repay other debts, so that those debts are replaced by borrowing secured on the borrower's home. The money comes from a remortgage to a new lender, a further advance from the current lender, or a second charge loan that sits behind the existing mortgage. The debts it clears are usually credit cards, personal loans, overdrafts, car finance and buy now pay later balances, so several payments become one. Mortgage borrowing usually costs less than unsecured credit: Bank of England figures for August 2026 put the average rate on interest-charging credit card balances at more than four times the average rate on newly drawn mortgages (Bank of England: Money and Credit, August 2026).

The trade-off is that short-term debts become long-term debts secured on your home. Spreading a five-year loan over 25 years can mean paying more interest in total even at a far lower rate, and falling behind puts your home at risk as well as your credit file. Debt consolidation works out cheaper when there is a plan to repay the consolidated amount quickly and the debts are not run up again, and it should be compared with the alternatives first. People who remortgage to pay off debt usually see the payment fall at once; whether the total cost falls too depends on the term, and the worked example further down this page shows the arithmetic.

A mortgage on a home you live in is a regulated mortgage contract when at least 40% of the property is used as a dwelling (legislation.gov.uk: Regulated Activities Order, article 61). A remortgage to consolidate debt or a further advance on your home therefore falls under the Financial Conduct Authority's mortgage conduct rules, MCOB. Second charge loans secured on a home have been regulated under the same mortgage rules since 21 March 2016 (FCA: PS15/9, the new regime for second charge mortgages). In Scotland the loan is secured by a heritable security rather than a charge, and the same rules apply. Where an adviser recommends a mortgage whose main purpose is to consolidate debts, the rules require them to take account, where relevant, of the cost of repaying a debt over a longer period, whether it is appropriate to secure debt that was unsecured and, for a borrower known to be in payment difficulties, whether negotiating with creditors would be more appropriate than a mortgage (FCA Handbook: MCOB 4.7A.15R). Some lenders pay the consolidated debts directly and others ask for evidence that they have been repaid; the section on what lenders and advisers must check gives the rule behind this.

This page is about borrowing secured on the home you live in. Raising money on a buy to let property is a different case, because most buy to let lending is business lending outside the FCA's mortgage rules; our buy to let mortgages page covers it.

Mortgage Lane arranges debt consolidation for homeowners with credit cards, loans, overdrafts, car finance and buy now pay later balances. Some of them have recent missed payments. Others are on a fixed rate where a second charge avoids early repayment charges, or are consolidating before a fixed rate ends. Mortgage Lane does not give debt advice. Where the debts have become hard to manage, free debt advice comes first, and the section on alternatives below says where to find it.

Debt consolidation mortgage rates

Debt consolidation is priced as the remortgage, further advance or second charge product it is, and the loan to value of the new total decides the band. Lenders price mortgages in loan to value (LTV) bands, so adding debts to the mortgage raises the loan to value and can move the whole loan into a higher-priced band. Some lenders price debt consolidation cases differently or restrict them, and how they do so varies by lender. A further advance is priced by your current lender, sometimes as a separate part of the mortgage with its own rate. A second charge lender prices its loan on its own criteria, and second charge borrowing can cost more than first charge borrowing.

To compare the routes, set the total cost of consolidating, including any early repayment charge on your current deal, product fees and the costs of the new loan, against what the debts would cost if you kept paying them as they are. Our guide to a true cost calculation on a mortgage shows the method, and the calculator on this page runs it for consolidation. A fee added to the loan is repaid over the same term as the debts, so it carries interest too.

Several debts and some equity in your home? Get in touch with your mortgage details and a list of balances, payments and end dates. We compare consolidation with keeping the debts and with the alternatives.

Debt consolidation mortgage criteria

Debt consolidation mortgage criteria start with the usual affordability and credit checks and add questions about the debts themselves. Lenders assess affordability on the whole new loan, look at how the debts built up and whether they are still building, and decide which debts they will repay. Five rows in the table rest on published rules, as at October 2026: regulation, affordability, repayment of the debts, term and advice. The other rows describe how lenders' own policies differ. Those policies change often, and each lender's underwriting decides a case. In Mortgage Lane's experience, applicants with adverse credit are usually limited to around 90% loan to value with the lenders we use, and some lenders set a lower limit for consolidation than for other borrowing (90% LTV mortgages and 85% LTV mortgages cover those bands).

Ways to consolidate debt into a mortgage, and how each is assessed

There are three ways to consolidate debts into a mortgage, and which one fits depends mainly on your current deal, your credit file and how much you owe.

Remortgage with capital raising

A debt consolidation remortgage moves the whole mortgage to a new lender and borrows more on top to repay the debts. This is also called capital raising or releasing equity, and our release equity from your home page compares it with the other equity routes. The new lender assesses the case as a full application: affordability on the new total, the credit file, the debts and its own valuation of the home. This route usually suits a borrower whose fixed rate is ending, because no early repayment charge then applies and the whole loan moves to a new deal at once. Without a new deal, the mortgage usually moves to the lender's standard variable rate, which our variable rate mortgages page explains. Where the fixed rate has longer to run, the charge for leaving early can outweigh the saving. Some lenders let you secure a new deal some months before the current one ends.

Get in touch three to six months before your deal ends.

Further advance from your existing lender

A further advance borrows more from your current lender on top of the existing mortgage. Depending on the lender, it can be set up as a separate part of the mortgage, often called a sub-account, with its own rate and term, which leaves your existing fixed rate untouched and avoids an early repayment charge. It is a regulated change to your mortgage, so the lender assesses affordability on the existing mortgage and the extra amount together (FCA Handbook: MCOB 11.6.2R), and it checks your credit file as it stands now. A separate part can also be given a shorter term than the main mortgage, which suits repaying the consolidated amount over a few years. Our page on remortgage for home improvements compares a further advance with a remortgage in more detail.

Get in touch with your current lender's details.

Second charge loan

A second charge loan is a separate loan from a second charge lender, secured on your home behind your first mortgage, which keeps its priority as the first charge. Your first mortgage and its rate stay as they are, so a second charge avoids disturbing a low fixed rate and the early repayment charge for leaving it. It can also suit a borrower whose credit history rules out a remortgage, because second charge lenders set their own criteria. The lender assesses affordability on both loans together, and where the loan would not be affordable unless the debts are repaid, the FCA's rules require it to take reasonable steps to make sure they are (FCA Handbook: MCOB 11.6.16R). Second charge loans can cost more than first charge borrowing and come with their own fees. Our second charge mortgages page and the guide to residential second charge mortgages cover how they work.

Get in touch with your current mortgage terms.

Debt consolidation with missed payments or defaults

Recent missed payments, defaults or county court judgments narrow the choice to specialist lenders, which tend to charge more and lend at lower loan to value limits; in our experience adverse credit usually limits borrowing to around 90% loan to value. A debt consolidation mortgage with bad credit can still reduce the monthly cost, but advisers look closely at why the debts built up. For a borrower known to be in payment difficulties, the adviser must consider whether an arrangement with creditors would be more appropriate than new secured borrowing, and on a first charge mortgage to a borrower with an impaired credit record the lender must take reasonable steps to make sure the debts are repaid where affordability depends on it. Our pages on mortgages with missed payments, mortgages with defaults and CCJ mortgages explain how lenders read each kind of entry, and remortgage with bad credit compares a product transfer, a specialist remortgage and a second charge.

Get in touch with your credit reports.

Part consolidation

Repaying only the most expensive debts, or those with the longest time left to run, while leaving low-cost or nearly finished debts alone, can cost less than consolidating everything. A loan with a year left at a low rate costs little to keep, and moving it onto a 25-year mortgage turns a short debt into a long one. A credit card balance on a high rate with no fixed end date is the kind of debt where consolidating can save the most. Part consolidation also keeps the new mortgage smaller, which can keep the loan to value in a lower band.

Some lenders exclude certain car finance agreements, so check the settlement terms before including one. You can repay a regulated consumer credit agreement early at any time (Consumer Credit Act 1974, section 94), and the finance company must give you a settlement statement when you ask for one (Consumer Credit Act 1974, section 97). On hire purchase the settlement figure clears the agreement. On personal contract purchase it includes the final balloon payment, so settling early is a decision to keep the car.

Get in touch with each debt's balance, rate and end date.

The trade-off: lower payments against more interest

Consolidation usually lowers the monthly payment and the rate, and it can raise the total interest and the risk to your home. Those are the main pros and cons of debt consolidation, and the table compares keeping the debts with consolidating them. Which side costs less depends mostly on the term: in the worked example below, £20,000 repaid over five years costs less in total than keeping the debts, and the same £20,000 spread over 25 years costs more.

What lenders and advisers must check

The FCA's rules put the suitability question on the adviser and the affordability question on the lender, and debt consolidation adds checks to both. An adviser recommending a mortgage whose main purpose is to consolidate existing debts must take account, where relevant, of three things on top of the usual suitability factors: the costs of increasing the period over which a debt is repaid, whether it is appropriate to secure a debt that was unsecured, and, where the borrower is known to have payment difficulties, whether negotiating an arrangement with creditors would be more appropriate than a mortgage (FCA Handbook: MCOB 4.7A.15R). The rules also treat an attempt by the firm to misdescribe the customer's purpose, or to encourage the customer to tailor the amount borrowed so that this rule does not apply, as tending to show a breach of the FCA's rule on acting in the customer's interests (MCOB 4.7A.16E and MCOB 2.5A.1R). In practice an adviser compares the cost of consolidating with the cost of the existing debts, looks at the term, and considers whether another option, including free debt advice, would serve the borrower better.

The lender must assess whether the new or varied loan is affordable before it lends, using the borrower's income, committed expenditure and household outgoings (FCA Handbook: MCOB 11.6). It also reads the credit history and how the debts built up; our page on low credit score mortgages explains what lenders see on a credit file. Where the loan would only be affordable once the debts are repaid, the lender must take reasonable steps to make sure they are repaid on completion, unless it has assessed affordability with the debts left in place (MCOB 11.6.16R). That rule covers every second charge loan used to consolidate debts and, on a first charge mortgage, a borrower with an impaired credit record. FCA guidance says one way to meet it is for the lender to pay the creditors directly as a condition of the loan (MCOB 11.6.17G). Some lenders pay every consolidated debt directly, themselves or through the solicitor, while others release the money to you and ask for evidence afterwards that the debts have been repaid.

A product transfer to a new deal with no extra borrowing, and no change to the terms likely to matter for affordability, may need no new affordability assessment (MCOB 11.6.3R). Consolidation always adds borrowing, so each route on this page is assessed in full. If a lender has already turned a consolidation application down, our mortgage declined on affordability page and the declined mortgages hub cover the next steps.

Alternatives to debt consolidation and free debt advice

Consolidating into a mortgage is one way to deal with debts, and comparing the alternatives to debt consolidation comes first. Mortgage Lane does not give debt advice, so this section sets out the published options and where to find free help. The simpler alternatives need no secured borrowing:

• A balance transfer card or an unsecured consolidation loan keeps the debt unsecured, so your home is not put at risk.
• Overpaying the most expensive debt first needs no new borrowing.
• Negotiating with creditors can bring reduced payments or frozen interest.

Free debt advice

Free, confidential debt advice is available from charities such as StepChange, National Debtline and Citizens Advice, and MoneyHelper's debt advice locator lists free services by phone, online and face to face (MoneyHelper: debt advice locator). GOV.UK advises speaking to a debt adviser to help choose the way to deal with your debts (GOV.UK: options for dealing with your debts). Free advice matters most for a borrower who is already struggling to keep up, and it costs nothing to take before deciding on consolidation.

Debt solutions in England, Wales, Scotland and Northern Ireland

Where debts cannot be repaid in full, there are formal and informal solutions, each with its own consequences for your credit file and for future borrowing. In England and Wales they include a debt management plan, an informal agreement with creditors to pay what you can afford; an individual voluntary arrangement (IVA), a legally binding arrangement managed by an insolvency practitioner; and a Debt Relief Order (DRO), for people who cannot pay and have little money or few assets. Scotland has its own schemes, the Debt Arrangement Scheme and protected trust deeds, alongside bankruptcy (Accountant in Bankruptcy: debt solutions). Northern Ireland has its own Debt Relief Orders and individual voluntary arrangements under its own insolvency law (Department for the Economy: alternatives to bankruptcy). Our IVA mortgages and mortgages after bankruptcy pages cover borrowing afterwards.

How a debt consolidation mortgage is arranged

Whether you remortgage to pay off debt, take a further advance or add a second charge, the process follows the same five steps.

1. Debt schedule. Every debt's balance, rate, monthly payment and end date, with recent statements, and the current mortgage's balance, rate, term and any early repayment charge.
2. Options compared. Keeping the debts, part consolidation, a remortgage, a further advance and a second charge, each costed in total over the term proposed, with the alternatives and free debt advice considered first where the debts have become hard to manage.
3. Term and repayment plan. The consolidated amount on a shorter term where possible, as a separate part of the mortgage, a shorter second charge or planned overpayments within the lender's allowance.
4. Application. An agreement in principle where the lender uses one, then the full application, with affordability assessed on the new total, the debts listed for repayment and the lender's valuation.
5. Completion. The debts repaid on completion, directly by the lender or the solicitor, or by you with evidence sent afterwards; cleared cards closed or their limits reduced where appropriate.

Lower payments, more interest: the arithmetic

Consolidating a debt into a mortgage lowers the monthly payment, and the term, more than the rate, decides whether it costs more in total.

Step 1. The same £20,000 repaid three ways

An illustrative case, not a product or an offer: £20,000 of credit card and loan debt with five years left to run, at an illustrative 22% a year. It is repaid three ways: kept as it is, added to the mortgage over a 25-year term, or added to the mortgage and repaid over five years. The mortgage figures use 5.2%, the illustrative rate used across our guides, which is not a product rate. Every figure is a standard capital repayment calculation, worked with the calculator on this page.

Step 2. What the term changes

Spreading the debt over 25 years cuts the payment by £433.12 a month, but it costs £2,635 more in interest than keeping the debts, even at a far lower rate, and it secures the debt on the home. Repaying the consolidated amount over five years still lowers the payment, by £173.12 a month, and cuts the interest by £10,387. Between those two, a 10-year term gives a payment of £214.09 a month and £5,691 of interest, so the cost rises quickly with the term.

The rate on the debts is an illustration. At a lower rate, keeping the debts costs less in total, so the case for spreading them over a long term is weaker; at a higher rate the monthly saving is larger. The calculator takes your own debts' rate and the months they have left.

Step 3. Fees and early repayment charges

The costs of moving count against the saving. A fee added to the loan is repaid over the same term, with interest: £1,000 added to the 25-year route at 5.2% adds £1,789 to its cost, the £1,000 itself and £789 of interest. An early repayment charge on the current mortgage is often worked out as a percentage of the balance repaid, as the mortgage offer sets out, so on an illustrative £150,000 balance each 1% is £1,500. A further advance or a second charge leaves the current deal in place and avoids that charge. The table shows the effect on the 25-year route.

On these figures, £1,000 of fees takes the extra cost of the 25-year route from £2,635 to £4,424, and a 1% charge on the current mortgage takes it to £4,135. Over five years the same £1,000 of fees still leaves the consolidated debt £9,249 cheaper than keeping it.

What decides the case

Consolidate only what is expensive, put it on a term close to the debts' original terms, stop the debts building again, and compare the alternatives, including free debt advice, first. The mortgage rate matters less than the term the consolidated amount is repaid over, and any early repayment charge or fee has to be counted against the saving. Our fixed term mortgages page explains how fixed rates and their early repayment charges work, and residential mortgages covers the wider choice of mortgage on your home.