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The Pros and Cons of increasing your mortgage to pay off your debts

Being in debt can be one of the most stressful experiences we go through and, nowadays, it can be hard to sort out this kind of situation as taking out new loans and financial products has become a lot harder in recent months. But, have you thought about increasing your mortgage to help you out here? This can be a viable and effective solution for a lot of people looking to sort out their debts once and for all.

The fact that you can do this in most cases as a homeowner brings with it a range of advantages and disadvantages. Given that you are thinking about using your home here to help you it is, of course, absolutely vital that you think hard about the pros and cons and weight them up against each other before you come to a decision either way. Let’s take a look at what you should be considering here:

The Pros…..
  • If you’ve built up equity in your home (i.e. your home is worth more than the mortgage that you have on it) then this is a ‘profit’ that you have made. But, the only way you can usually access this profit is by selling your home. Extending or increasing your mortgage will release some of this equity for you to use now, without having to sell it in the first place.

  • Mortgage rates are the lowest rates in the lending sector. This allows you to bundle your debts into the lowest cost loans product available to you. If your debts include one or more credit card then you are currently paying at the highest interest rate levels in the lending sector.

  • Your repayment costs here will not mean a significant increase in your monthly mortgage payment as the money you ‘add on’ to your mortgage here will be paid back over many more years due to the standard length of most mortgages.

The Cons…..
  • You will increase your mortgage and decrease the equity that you have built up over time. This will technically give you a lower profit margin to play with if you do decide to sell your home in the near future.

  • Your monthly mortgage payments will increase. Although you will see savings on your current debt commitments on a monthly basis you will still need to factor these higher mortgage costs into your budget.

  • You might ultimately end up having to pay more back to repay off your debts this way as you will be committed to them for a far longer term than that given with a standard loan.


Finally, you must think carefully about using your home to raise finance. If things go wrong here then you could well lose it. However, if you have considerable debts to repay then this could happen to you in any case and, for many people, this is the quickest and most cost effective way of sorting out their debts once and for all.
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