Remortgage to pay off credit cards

How lenders typically treat it

A general guide to how the market behaves, not a promise about any lender. Criteria change and every case is assessed individually. See the lender criteria database for named lenders.

Can you remortgage to pay off credit cards?

Yes, and lenders see it every day. Remortgaging to pay off credit cards means replacing your existing mortgage with a larger one from the same or a new lender, and using the extra money released to clear the cards. If you owe £150,000 on your mortgage and £15,000 across three cards, you apply for £165,000, the solicitor pays the cards on completion, and you are left with one monthly mortgage payment instead of a mortgage plus three card bills.

Lenders treat card consolidation as a legitimate purpose, with limits. The most important is loan to value: where any of the new borrowing repays debt, most lenders cap the mortgage at 80% or 85% of the property's value, against 90% or more for a straight like-for-like remortgage. They also run a full affordability assessment on the larger loan, normally removing the card payments from your outgoings because they will not exist after completion. Our guide to adding debt to your mortgage covers the general rules.

Timing matters as much as criteria. Inside a fixed rate, remortgaging means paying an early repayment charge, which can wipe out the benefit; our page on remortgaging with an early repayment charge works through when that is worth it. If your deal is ending, the timing is ideal because you were going to remortgage anyway.

Because the new borrowing is secured on your home, the consequence of missing payments is more serious than with a card: your home may be repossessed if you do not keep up repayments on the mortgage.

Why do credit card balances barely fall on minimum payments?

Because the minimum payment is designed to keep the account open, not to clear it. Most UK cards set the minimum at that month's interest plus 1% of the outstanding balance, with a small floor of £5 to £25. At the start almost all of the payment is interest, so the balance shrinks by only the 1%. As the balance falls, the minimum payment falls with it, which stretches the repayment out for decades.

Take a £15,000 balance at 24.9%. In the first month the interest is £311 and the 1% capital element is £150, so the minimum payment is £461 and the balance falls by just £150. If you only ever paid the minimum as it reduced each month, the card would take about 345 months, nearly 29 years, to clear and you would repay roughly £45,000. If instead you kept paying a fixed £461 every month without touching the card, it would clear in 55 months for about £25,240.

That is why so many people feel they are paying and getting nowhere. A card on minimum payments is close to a permanent standing charge of several hundred pounds a month. Free advice from MoneyHelper, StepChange or Citizens Advice can show you where your own cards sit in that picture, and whether a budgeting change alone would fix it before you consider borrowing against your home.

What does remortgaging to pay off credit cards cost overall?

Here is the honest version of the sum. Moving £15,000 of card debt onto a mortgage cuts the monthly payment sharply, but interest charged over 20 years on a balance that might have been cleared in five adds up. Whether you pay more or less in total depends on what you compare it with.

Three comparisons fall out of that table. Against paying the minimum only (about £45,000 over 29 years), the remortgage costs roughly half. Against a disciplined fixed £461 a month (about £25,240 over 55 months), the remortgage total of £24,561 is similar, but it is spread over 20 years rather than under five, and the £15,000 sits on your home. Against a 0% balance transfer that you clear within the promotional period, the remortgage costs far more.

The way to have the low monthly payment and the low total cost is to overpay. Most mortgages allow overpayments of 10% a year without penalty. If you put even part of the £359 monthly difference towards overpaying, the £15,000 element clears in a fraction of the term and the total interest falls accordingly. Our guide on whether consolidating into your mortgage costs more overall goes deeper, and the debt consolidation calculator lets you test your own balances.

Will the lender make you repay the cards on completion?

Usually, yes. When a remortgage is for debt consolidation, many lenders add a condition to the mortgage offer requiring the named debts to be repaid on completion, and they instruct the conveyancing solicitor to do it. Rather than sending the whole advance to your bank account, the solicitor pays the existing mortgage lender, then pays each card provider the settlement figure shown on a recent statement, and sends you only what is left. You will be asked for up-to-date statements for every card being cleared so the amounts can be evidenced.

Lenders do this for a straightforward reason: the affordability calculation assumed the cards would be gone. If the funds went to you and the cards stayed open with balances on them, you would be carrying the larger mortgage and the card payments together, which is exactly the position the assessment ruled out. Some lenders go one step further and require confirmation that the accounts have been closed, or record on the offer that the credit limits must be reduced.

In practice this is helpful rather than restrictive. It removes the temptation to keep a card "just for now", and it means the consolidation is complete on the day the mortgage completes rather than depending on you making a dozen separate payments. A qualified adviser will know which lenders insist on solicitor repayment and which release the funds to you against an undertaking.

One detail: a statement balance can lag recent interest by a few weeks, so ask each provider for a current figure close to completion and expect a small residual to clear yourself.

Should you close the credit cards after remortgaging?

For most people, yes, or at least cut the limits to a level you would be comfortable repaying in full each month. The risk with any consolidation is not the maths, it is the behaviour. Clearing three cards and then running them back up over the next two years leaves you with the larger mortgage and the card debt, and a second consolidation is far harder to get.

There is a case for keeping one card open. Scoring models reward a long-held account with a low balance against its limit, and a card cleared in full by direct debit each month is a useful emergency buffer. If you keep one, set the limit low and keep it out of your wallet.

Close the rest properly. Phone the provider, ask for the account to be closed, and check your credit file a month later to confirm it shows as settled and closed. Cancel any continuous payment authorities or subscriptions that were charging the card, otherwise they will fail or reopen a balance.

Finally, put the monthly saving to work. In the example above the outgoing on the card debt fell from £461 to £102. If that £359 quietly disappears into everyday spending, the consolidation has cost you 20 years of interest for nothing. If some of it goes into mortgage overpayments and some into savings, you get the low payment now and a lower total cost as well.

What improves your chances

• Have a recent statement for every card so the balances and settlement figures can be evidenced at application.
• Make at least the minimum payment on time on every card for the six months before you apply, and preferably longer.
• Bring any card that is over its limit back under it, since over-limit fees on statements are read as a sign of strain.
• Check that the new mortgage stays within 80% to 85% loan to value after adding the card balances.
• Stop using the cards once you have decided to consolidate, so the balance at completion matches the figure the lender assessed.
• Declare the purpose as debt consolidation from the start; lenders see the balances on your credit file anyway.

Alternatives worth considering

If your mortgage is mid-fix with a large early repayment charge, or you would rather not disturb a low rate, a secured loan (a second charge mortgage) can clear the cards while your existing mortgage stays exactly as it is; our guide to keeping your rate and clearing your debts explains how. For smaller balances that you can clear within two to three years, a 0% balance transfer card or an unsecured personal loan avoids putting your home behind the debt; our balance transfer versus consolidation loan comparison sets out the trade-offs. And if the cards are only the visible part of a wider problem, a free debt charity can look at a debt management plan or other options before any borrowing is considered.