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A Remortgage Consolidation Loan

Updated on December 9, 2010

Why Get A Remortgage Consolidation Loan

There is probably no worse form of debt than credit card debt, not only do credit cards have absurdly high interest rates, the debt doesn't appreciate in value. A mortgage on the other hand is one of the best forms of debt, the interest rates are very low, and your home is an asset that will increase in value. In many cases is can be an excellent idea to replace your high interest credit card debt with a much lower interest remortgage consolidation.

One of the most widely touted means of dealing with credit card debt is through a consolidation loan. These loans can certainly be a great way to reduce the interest rate that you are paying on your debt, but for homeowners a remortgage consolidation will lower the interest even further. A remortgage consolidation will allow you to use the equity that you have in your home and use it to pay off your high interest debts. Because a remortgage consolidation is secured by your home it is probably the cheapest loan you will ever get.

Cost is the number one reason that a remortgage consolidation is a better idea than a consolidation loan. Interest rates are heavily influenced by your likelihood of paying your bills, since your home is on the line you are very likely to make your payments. The tax system also provides incentives for most people to use a remortgage consolidation, for most people there is a tax break on mortgages that effectively reduces the interest rate even further.

Since you are putting your home on the line there is a small danger of repossession and this is something that you have to keep in mind. In general since you should be lowering your interest rate your monthly payment should also be lower which should make it easier to pay your bills. However if you find it necessary to remortgage after interest rates have gone up you may have a problem. You may find yourself in a situation where the interest rate on your new mortgage is higher than the rate on your old mortgage. This could cause an increase in your monthly payments and should be avoided. Using remortgage consolidation is usually only a good idea if interest rates are lower than when you took you initial mortgage.

If you are thinking about using a remortgage consolidation to pay off your high interest debts it is probably a wise move to talk to a remortgage broker. A lot of people find remortgages to be very confusing, especially all the fine print in the remortgage agreement. A remortgage broker is an expert who can help you sort through the terms of the agreement and make sure you understand what you are getting into. They can also help you sort out the various offers from the different lenders to make sure that you get a good deal.


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