How to Consolidate Debt Into Your Mortgage

For some homeowners, consolidating existing debts into their mortgage can provide more manageable monthly payments and a simpler financial structure. However, lenders assess these applications carefully because consolidating unsecured debt into a secured loan increases their risk.

This guide explains how to consolidate debt into your mortgage, what lenders look for, and what you should consider before beginning the process. This article provides general information only and does not offer regulated mortgage advice.

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What Does It Mean to Consolidate Debt Into Your Mortgage?

Consolidating debt into your mortgage means increasing your mortgage balance (through a remortgage or further advance) to pay off unsecured debts such as:

• Credit cards
• Loans
• Store cards
• Overdrafts
• Hire purchase agreements

Instead of multiple monthly payments, your debts are repaid as part of your mortgage over the mortgage term.

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When Do Lenders Allow Debt Consolidation?

Lenders may allow consolidation if the overall case still fits their risk profile. They assess:

• Loan-to-value (LTV)
• Income stability
• Debt levels being repaid
• Credit history and recent conduct
• Bank statement behaviour
• Whether the consolidation improves affordability

Each lender has its own approach — some allow significant consolidation, while others restrict it or decline entirely.

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How to Consolidate Debt Into Your Mortgage: Step by Step

(General Information Only)

1. Review Your Current Mortgage and Debts

Understand:

• Your existing mortgage balance and rate
• How much equity you have
• The debts you want to consolidate
• Total monthly payments now versus after consolidation

This helps determine whether consolidation may reduce monthly outgoings.

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2. Check Your Loan-to-Value (LTV) Position

LTV affects your options significantly.

Example:
If your home is worth £250,000 and your mortgage is £150,000, your LTV is 60%.
If consolidating debt adds £20,000, your new mortgage becomes £170,000 → 68% LTV.

Most lenders offering debt consolidation require:

• LTV under 85%
• Ideally lower, depending on the credit profile

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3. Lenders Assess Affordability With the New Mortgage Balance

Affordability checks include:

• Income
• Outgoings
• Future monthly mortgage cost
• Whether the consolidation improves financial stability

Lenders want reassurance you can manage the new mortgage responsibly.

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4. Check Your Credit File

Lenders will review your credit profile across:

• Experian
• Equifax
• TransUnion

They look at:

• Payment history
• Missed payments or defaults
• Recent borrowing
• Credit utilisation

A cleaner recent record improves options.

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5. Expect Underwriters to Request Bank Statements

Bank statements demonstrate:

• How debts have been managed
• Income consistency
• Any financial stress indicators
• Whether consolidation will genuinely help stabilise finances

Returned payments and unarranged overdrafts can affect lender confidence.

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6. Decide Between a Remortgage or a Further Advance

There are two main ways to consolidate:

Option A: Remortgage to a new lender

This replaces your existing mortgage and adds the consolidated debt.

May suit you if:

• You want a new lender
• You want a different type of rate
• Your current lender does not allow consolidation

Option B: Further advance with your existing lender

This adds a second loan on top of your current mortgage.

May suit you if:

• Your rate is favourable
• You don’t want early repayment charges
• Your existing lender is flexible on consolidation

Both options depend on lender policy.

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7. Prepare Documentation

You may need:

• 3–6 months of bank statements
• Payslips and P60
• Identification and proof of address
• A full list of debts being repaid
• Evidence of settlement after completion

Clear documentation speeds up lender assessment.

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What Lenders Look for in a Debt Consolidation Mortgage Application

1. Why the Debt Built Up

Underwriters will assess if the debt resulted from:

• Temporary financial difficulty
• Overspending
• One-off events
• Income changes

A clear explanation helps them understand your circumstances.

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2. Whether Consolidation Improves Your Finances

Lenders must see:

• Lower total monthly outgoings
• Stable bank behaviour
• Sustainable future payments

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3. Credit History and Recent Conduct

Even with past issues, lenders may accept consolidation if recent conduct is strong.

They focus on:

• Last 6–12 months’ payments
• Any late or missed payments
• Use of overdraft
• Borrowing patterns

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4. The Amount Being Consolidated

Some lenders cap the amount of unsecured debt that can be repaid through the mortgage.

Common limits include:

• Up to £20,000
• Up to £25,000
• Up to a percentage of your mortgage balance

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5. Risk of Future Borrowing

Lenders assess whether consolidating debt into your mortgage may free up credit and cause future borrowing.

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Benefits of Consolidating Debt Into Your Mortgage

(General Information Only)

• Lower monthly payments due to spreading cost over the mortgage term
• Simplified finances with one monthly payment
• Potentially lower interest rates than unsecured debt
• Improved affordability calculations for some borrowers

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Potential Drawbacks to Consider

(General Information Only)

• Stretching debt over a longer term may increase total interest paid
• Securing previously unsecured debt increases risk
• Taking on higher mortgage borrowing may impact future remortgage options
• Some lenders charge fees for remortgaging or further advances

It’s important to consider both the short-term and long-term implications.

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Common Scenarios and How Lenders Respond

Scenario 1: Consolidating credit cards with strong recent conduct

Many lenders may consider this if the applicant has good affordability and stable income.

Scenario 2: Consolidating after recent missed payments

Options may be more limited; some lenders prefer a period of stable behaviour before approving.

Scenario 3: High LTV with large debt consolidation

Lenders may restrict borrowing if the LTV exceeds their comfort threshold.

Scenario 4: Consolidating debts arising from temporary hardship

Manual underwriters may be more flexible if circumstances are well evidenced.

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Summary

You can consolidate debt into your mortgage, but lenders assess affordability, credit conduct, income stability and the level of consolidation required. Many borrowers successfully remortgage or take a further advance to manage debts more effectively, provided they can show stable financial behaviour and a sustainable repayment plan.

This article provides general information only. For personalised guidance, regulated mortgage advice is required.