Remortgage to Pay Off Debt: What You Need to Know Before Making the Move

Picture this: you’ve got bills piling up, cards maxed out, and the interest is eating away at your paycheck before you even see it. Now you’re looking at your home, wondering if its value could save you from drowning in that debt. Turns out, you’re not alone—research in the UK found that over a fifth of homeowners have looked at remortgaging as a lifeline for debt.

Remortgaging—switching your current mortgage to a new deal or lender—feels like a magic reset button. But like every shortcut, there’s a catch or two you can’t ignore. Some folks have seen their monthly payments drop hundreds, letting them sleep easier. Others, though, have tripped on hidden fees and found out the easy way is not always the cheapest. Let’s break down what this really means for you, how it works, and if you should actually do it, or just stick to the treadmill you’re already on.

How Remortgaging to Pay Off Debt Actually Works

When you remortgage to clear debts, you’re borrowing more than you currently owe on your home and using the extra cash to kill other debts—credit cards, car loans, personal loans, you name it. Lenders usually base the new loan on your home’s current value and your ability to pay, so if you’ve got a good bit of equity (the home’s value minus what you still owe), that helps a lot.

The math is simple but the decision isn’t. Let’s say your current mortgage is £120,000 on a home worth £200,000, and you owe £20,000 on various high-interest debts. You could remortgage for £140,000, pay off the old mortgage, slap the rest on your nagging debts, and have just one monthly payment—usually at a much lower rate than credit cards bleed you for. The average credit card APR in the UK is nearly 30% as of late 2024. Standard mortgage rates, even after the 2022-2024 rate jumps, are hovering around 5% or 6%—that’s a huge gap.

But the devil is in the details. If you just clear your short-term debts but pay that money off over 20 or 25 years—the typical mortgage term—you could end up shelling out more interest over time, even if the headline rate is low. There’s a tradeoff between instant relief and long-term cost. And there’s always your home on the line if things go off the rails.

Remortgaging isn’t just about finding any lender who’ll say yes. Each one will poke through your credit history, current debt levels, regular expenses, income, and even your spending habits. If your debt looks out of control, some lenders get skittish. Others might offer you a deal but stick you with higher rates, more fees, or restrictions (like needing a bigger chunk of equity, often at least 20%).

If it sounds tricky, that’s because it is. Common steps look like this:

• Value your home (lenders may use their own surveyors).
• Pull together all your current debts and interest rates.
• Figure out how much extra cash you really need (don’t just guess).
• Shop around or use a mortgage broker to compare what’s out there.
• Watch for early repayment charges and legal/admin fees (total costs can hit £500–£2,500 depending on your lender and situation).
• Apply, get the new loan, pay off old debts, and start your new monthly payment cycle.

The best advice? Never start this process without checking all the numbers closely. Use online calculators—and do it with a worst-case interest rate, not just the rosy low ones you see on ads.

Pros and Cons of Remortgaging for Debt

This trick isn’t a magic bullet. Here’s a plain-spoken look at what goes right—and what can totally blow up if you’re not careful.

• Lower Monthly Payments: By spreading high-interest debts over years, you shrink what you owe each month. People often save hundreds or more every month, giving some breathing room.
• One Simple Payment: No more worrying about which credit card is due when, or missing some loan bill hiding in your email spam box. There’s just your mortgage, usually on autopay.
• Potential to Improve Credit: If you get current debts to £0 and never miss your remortgage payments, your credit score may go north after a while.

But wait—there are some bruises that come from the bumps in the road:

• Long-Term Interest Trap: A £5,000 credit card debt charged at 30% is brutal—unless you pay it off quick. But switch that debt to a mortgage at 6% over 20 years, and the total interest often ends up being more than keeping it short and savage. For bigger debts, this adds up frighteningly fast.
• Your Home is Security: Mess up with a credit card, and you’ll deal with calls and maybe legal letters. Miss mortgage payments and—if you do nothing to fix it—you could actually lose your house.
• Fees Everywhere: Even if you land a low headline rate, lenders make money on arrangement fees, valuation costs, conveyancer charges, and early repayment penalties. The fine print stings, so don’t skip it.
• LTV Ratio Affects Deals: Your loan-to-value (LTV) ratio is just the mortgage as a % of your home’s value. Go above 85% (or sometimes 75%), and most cheap deals disappear, leaving you with pricier options or being rejected altogether.

A 2024 Which? Money review found that nearly 38% of people who remortgaged for debt were surprised by extra fees—and 25% ended up paying more in total interest than if they’d just hammered the debts directly.

So yeah, short term, it can save your bacon. Long term, it can eat into your savings. There’s no free lunch here—especially if you borrow more than you needed just because you could.

Tips and Alternatives—Getting it Right

The first thing: don’t feel pressured. Lenders and mortgage brokers make commissions on remortgages, so some will try to push you a bit, especially if there’s commission in it. Take time to weigh your choices. A few practical tips from folks who’ve been there:

• Work out your exact debt total—for real, not just what you remember from last month’s bills. Miss one, and you might still need that extra card later with high-interest again.
• Figure out the new monthly payment—including every single fee baked in. Use a comparison site that gives you the true cost, not just headline rates.
• Don’t add more than your debts—if you borrow a chunk extra "for emergencies" then spend it, you’ll kick yourself when the interest starts eating away at it over years.
• If your credit score is poor, wait until it’s improved before remortgaging—you may get a much better rate in six months by paying off some small debts first.
• If you’re already behind on mortgage payments, remortgaging will be much harder. Focus on getting current first.
• If you’re unsure, talk to a fee-free mortgage broker rather than one who charges or gets a percentage, and always check for regulated advisers—bad advice can be worse than none.

Thinking outside remortgaging? Here’s what else might work:

• Zero percent balance transfer cards: If your credit’s good, some cards offer 18+ months with no interest, letting you hammer down debts without lender fees or putting your home at risk.
• Debt management plans: Non-profit agencies help you set up plans to pay what you actually can afford, sometimes with frozen interest (great if your income’s squeezed).
• Refinance just your smaller debts: Personal loans for smaller sums can be competitive and mean less risk than mortgaging your whole house again.
• Snowball method: Pay the minimums everywhere, use any extra to pay off the smallest debt fast, then use that payment for the next—momentum is real here.

No single fix fits all. Mix and match these tips with what’s in your control—just don’t rush, especially when your home’s on the table.

What Lenders and Borrowers Are Seeing in 2025

The mortgage scene in 2025 isn’t what it was even a year or two ago. Every lender got spooked by high inflation and interest rate hikes in 2022 and 2023, so deals are less generous and approvals take more scrutiny. Most lenders ask for more paperwork: payslips, tax returns, or bank statements, especially if you’re self-employed. They’ll stress test your budget, sometimes assuming higher future rates, to make sure you’re not walking into a trap.

Home values shot up during the pandemic, then cooled by ‘24. Now, according to Nationwide’s Q2 2025 housing report, average UK home prices have nudged up slightly after a two-year plateau, but that means less extra equity for debt consolidation. If your home’s value is less than you think—or your debts dragged your credit rating down—expect a harder time getting approved or snagging a good rate.

One quirky fact: The FCA says almost 20% of people who remortgage for debt have to reapply more than once because of blips in their credit or paperwork mix-ups. Missed utility bills, overdraft fees—even a maxed-out phone contract—can spook lenders during the checks. Fix these before you hit “apply.”

Don’t ignore the practical, real-life limits either. Expect your remortgage to take at least 6–8 weeks in 2025, sometimes longer if there’s missing paperwork or legal issues on the house’s title. At the same time, those debts don’t take a vacation—make sure you can cover the bills while waiting.

And here’s a smart tip: double-check if your current mortgage has an early repayment penalty. As many as 40% of fixed-term deals in 2025 carry penalties that can run into thousands. Paying that fee could zap away most of the money you hoped to save, so get it in writing before you pull the trigger.

Nothing about remortgaging for debt is simple, but if you play your cards right, it can build you a bridge over troubled water—just make sure it’s not a bridge to nowhere. Other paths, like balance transfers or debt plans, might fit better if you don’t want to risk the roof over your head.