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Can I consolidate my debt before applying for a mortgage?

Written byKoyo Loans
First published17th October 2022
  • Introduction
  • Can I consolidate my debt before applying for a mortgage?
  • Can you consolidate debt into a first time mortgage?
  • Can you remortgage to consolidate debt?
  • Will debt consolidation affect my mortgage?
  • Conclusion

In 30 seconds…

Taking out a personal loan to consolidate your debts is an effective way to reorganise your finances. It condenses multiple repayments into one and can even reduce your monthly outgoings when done correctly. Some people consolidate their debts into a first-time mortgage or even consolidate their debts before submitting a mortgage application. In most instances, debt consolidation won’t affect your mortgage, provided you make the stipulated payments on time. However, if you miss your repayments on either of your arranged forms of credit, your credit score is likely to take a hit as a result.


Consolidating your debts can be an effective way of reorganising your finances. But what happens if you already have a mortgage? Below, we take a look at what you need to think about if you’re planning to consolidate your debts and what impact it might have on your current or future mortgage payments.

Can I consolidate my debt before applying for a mortgage?

It’s possible to consolidate your debt prior to submitting a mortgage application. However, it’s crucial to make your repayments on time. Provided you meet the agreed monthly repayments, a mortgage lender has no reason to look at the debt consolidation negatively.

Consolidating your debts reduces the number of monthly payments that you are required to make. For most people, this makes the process of making debt repayments that little bit easier and reduces the risk of missing payments. When you’re looking to apply for a mortgage, consolidating your debt and then making the repayments on time may actually help your application.

This is because debt consolidation can improve your financial management, which can lead to an improvement in your credit score. Also, consolidating your debt can potentially help you pay it off more quickly, which reduces your debt to income ratio. Ultimately, provided you meet your repayments, consolidating your debts shouldn’t cause you any issues when you apply for a mortgage.

Can you consolidate debt into a first time mortgage?

Consolidating your debt into a mortgage is a possibility for some people, but it’s not as straightforward as you might expect. This is because mortgage lenders are unlikely to lend you more money than the house is worth, so you might need to make a bigger down payment if you’re planning to consolidate some of your debt into a first-time mortgage.

A lot also depends on your current credit score and your recent credit history. As a first time buyer, you will need to show a good track record of financial management, and you might struggle to get the mortgage that you need if your debt to income (DTI) ratio is too high. Guidelines suggest that you can have up to 43% DTI when buying a home, which should include your mortgage.

Still, consolidating your existing loans into a first-time mortgage is a viable solution for some borrowers. It’s best to discuss your plans with a mortgage broker, as they will help you find products to match your borrowing requirements. If successful, you will find that consolidating your loans into your first mortgage can be an effective way to get your monthly repayments under control.

Can you remortgage to consolidate debt?

For some people, remortgaging to consolidate debt can be an effective way of reducing monthly outgoings and making more manageable repayments. Loans secured against property are also often the cheapest way to borrow money.

If you have built up enough equity in your property, there’s no reason why you can’t remortgage to pay off some of your other outstanding debts. You can either apply for a bigger mortgage with your current lender or apply for a new mortgage entirely. Currently, the maximum loan to value (LTV) ratio for remortgaging a property is 90%.

So, for instance, if your property is worth £100,000, you could borrow a maximum of £90,000. If your current mortgage is £80,000, you could use the additional £10,000 from the remortgage to consolidate your other debts. You just need to be careful when you’re remortgaging, as you don’t want your interest rates to significantly increase.

Will debt consolidation affect my mortgage?

Provided you meet the stipulated repayments on your debt consolidation loan, it shouldn’t affect your mortgage. However, if you miss the payments on either your debt consolidation loan or mortgage, your credit score will take a hit.

It’s essential that you don’t default on your mortgage payments, as you put your credit file at risk. You will also receive a default notice from your lender, which happens if you have made reduced or no payments over a three to six month period. If you don’t speak to your lender and take steps to make up the missed payments, they can take action against you to reclaim the money that they owe.

So, if you take out a debt consolidation loan that you can’t afford and it ends up putting you in financial hardship, it will cause you significant problems as far as your mortgage repayments are concerned. Therefore, before applying for a debt consolidation loan, make sure you understand the terms and can afford to meet the new payment schedule.


Consolidating your debts shouldn’t have a negative impact on your mortgage, and you may even be able to combine the two. However, things can get complicated, particularly if you’re applying for a first-time mortgage, so it’s worthwhile speaking to a mortgage broker to help you negotiate an ideal arrangement for your financial circumstances.

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Key Takeaways

Consolidating your debts can be an efficient way to take control of your debt management. But when you have or are applying for a mortgage, it’s important to think about how consolidating your debts is likely to affect your monthly payments. Some borrowers consolidate their debts before applying for a mortgage, which can lead to an improvement in credit score over time. This can, in turn, help you access lower interest rates on your mortgage.

Alternatively, it’s also possible to consolidate your debts into a first-time mortgage. However, this is a relatively complex process and is dependent on your credit score and debt to income ratio, so it’s not a viable option for everyone.

Another potential option for homeowners is to remortgage to consolidate debt. This can be a great way to reduce your monthly outgoings and may also result in more manageable repayments. However, you will need to have built up sufficient equity in your property to remortgage, so again, it won’t be viable for everyone. Ultimately, consolidating your debts can be a smart move as far as your personal finances are concerned, but you need to make sure the option you take is viable for your current debt commitments.

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