How to Combine Mortgage and Home Equity Loan

Are you trying to know more about ‘combining two mortgages into one’? This is the right place. We’ll talk about how you can join a mortgage and a home equity loan, following the UK 2023 laws. This is important to know if you want to make your debt simpler.

Here are some things we’ll cover:

•  The difference between a mortgage and a home equity loan.
•  The real cost of a poor home equity loan.
•  Why people choose to get home equity loans.
•  How to join a mortgage and a home equity loan.

We know how hard it can be to get your head around these things, but you’re not alone. Over 6,900 people visit our website each month seeking advice on secured loans.

But don’t worry; we’re here to help you make an informed decision.

Can I consolidate my mortgage and home equity loan?

Yes, it’s possible for some homeowners to consolidate an existing home equity loan into their mortgage. 

This would be a type of debt consolidation. 

Although home equity loans can be used to pay off multiple other debts. They can also be consolidated into other debts themselves, including a mortgage. 

After combining your mortgage and home equity loan, you’ll only have one monthly repayment instead of two separate repayments and separate debts. 

How do you combine a mortgage and home equity loan?

To combine a mortgage and home equity loan, you have to ask your mortgage lender to extend your mortgage. 

By borrowing more on the mortgage, you’ll have a bigger mortgage to repay, but you’ll also receive a cash lump sum that can be used to pay off the home equity loan. You could ask for additional borrowing from your current mortgage provider, or you might want to switch to another provider offering a better deal. 

If you have limited home equity remaining, the mortgage lender might require guarantees that the additional borrowing will be used to repay the home equity loan, rather than for any other use.

But because the mortgage is the senior lien of credit on the property, the mortgage lender will always have priority to recover the debt from sale proceeds should foreclosure occur. 

Combine mortgage and home equity loan – why?

The main reason you might want to add a home equity loan debt to your mortgage debt is to save money. Consolidating these loans can save you money if your mortgage provider is offering a better interest rate than your home equity loan provider. 

But it’s important to look past any introductory interest rates or short-term fixed rates. Try to consider the whole picture – possible with the support of a professional – to really understand if the consolidating will save you money. 

You should make yourself aware of any early repayment fees and other loan charges before extending your mortgage. 

Another reason you might consider combining a mortgage and home equity loan is to make repayments easier. Putting your debt in one place often makes it easier to deal with. You’ll only have to remember one repayment date each month. 

Combining mortgages and home equity loans after renovations

Combining mortgages and home equity loans is somewhat more common after home renovations have taken place. The reason for this is all to do with using home improvements to increase home equity.

As mentioned above, a home equity loan is commonly used to make home improvements. Some data suggest that the average home renovation in the UK will increase the value of the property by 10%, excluding cosmetic renovations. 

So, you might borrow against your home equity to access credit to finance a home renovation, but because the renovation itself will likely increase the property value, the process is more worthwhile. 

If you used a home equity loan for this reason and increased your property’s value, a mortgage lender could revalue your home, which then enhances your ability to borrow more on your mortgage and pay the equity loan off. 

Even though extending a mortgage to pay off a home equity loan is relatively common, it becomes a little easier when you’ve recently increased your home’s market value.