| Financial Guidance

How to turn a mountain of debts into one smaller monthly repayment

Struggling to manage and repay multiple debts? Did you know that if you own your own home, you could quickly reduce the interest rate on your debts as well as your monthly repayments using a second mortgage?

Repaying multiple debts with one manageable payment is widely referred to as “debt consolidation”. Below, we’ve included a short animation that will help underline just what we mean by debt consolidation, as well as highlighting its benefits.

What’s a second mortgage?

Second mortgages are loans that use your home as security. They are called second mortgages as the lender takes secondary priority behind your main (first charge) mortgage, without affecting it. Many people use second mortgages to access the equity they have in their home instead of re-mortgaging as comparatively this can be less expensive and can be less restrictive on qualification for the loan and the purpose of the loan. They’re used for a variety of purposes, including debt consolidation. Typically they can be arranged in less time, avoid expensive upfront fees and mean that the existing mortgage remains in place - avoiding, for example, any penalties for early repayment. Essentially, if you take out a second mortgage, then you have two [separate] mortgages on your home, two loans owed to two different lenders.

How can a second mortgage help to better manage your debt?

Today’s access to, and reliance on credit can mean that debts have a nasty habit of stacking up. Keeping on top of them can become a little overwhelming. As we’ve highlighted in the video, organising these debts into one manageable payment can make the world of difference when it comes to feeling on top of things and reducing your day-to-day stresses. One of the many benefits of using a second mortgage for this purpose is that you don’t get penalised for overpaying. This means that on good months you can pay more off your debt, helping you to clear it sooner and achieve your debt free money goals.

How can a second mortgage reduce the interest you pay on your debt?

Because a second charge lender will use your home as security for your loan, the risk (to them) of not being paid back is significantly reduced. This means that the interest rates available to you are often very competitive when compared to unsecured facilities such as personal loans, credit cards and so on.

Consolidating all of these unsecured debts using a second mortgage means that you can often enjoy a much lower rate of interest!

How can a second mortgage reduce your monthly repayments?

As well as often enjoying lower interest rates, second mortgages can be repaid over a much longer term. These two features mean that your repayments can be significantly reduced - by hundreds and sometimes even thousands of pounds!

For savvy borrowers, this can simply provide a more flexible way of managing cash flow, using their increased level of disposable income to build a cushion to help when those unexpected bills fall through the letter box - and helping to avoid further, expensive, borrowing. And, as most second mortgages allow the borrower to make overpayments, they can significantly speed up their journey to becoming debt free.

How do I get a second mortgage?

Well, that’s where Loan.co.uk come in. We have a full market panel of specialist second mortgage lenders and can help you get the best rate available based on your individual circumstances. We have experts on hand who are dedicated to making things quick and simple. You can contact us on 0345 450 4678.

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