Debt consolidation mortgage...

With the dramatic rise in house prices that have been seen in recent years many people have found that they have significant equity in their properties. As rates are now very low many people have taken the option of releasing some of their available equity and paying off other debts, consolidating all their borrowing into one loan, with one monthly payment.

There are several pros and cons to debt consolidation: the main advantage is that this type of refinance is likely to reduce your monthly outgoings, possibly dramatically. It would also obviously be easier to keep track of one payment than several! On the other hand, although your monthly payment may drop, the total amount of interest you will pay back will probably be far greater than you would pay on a short term personal loan, for example.

One way round this is to refinance with a flexible second mortgage, which would allow you to pay back the additional debt you have consolidated over a shorter term than the original mortgage, either by paying in lump sums or by increasing your monthly direct debit. In this way you can be sure that not only will you be paying less interest on a monthly basis than you were before, but you will also pay less interest in total.