There are many reasons to remortgage your home, including saving money, but one option often over looked during the recent recession is to consolidate debt into a cheaper monthly repayment.

To consolidate debt you must have equity in your home, and you must be aware that failure to meet your remortgage payments can result in you losing your home, but your mortgage is one of the cheapest debts you will have, except for a student loan, and with interest rates currently so low, you will see considerable monthly savings.

By remortgaging your home you can release equity which you can use to pay off your more expensive debts, like credit and store cards, or any finance you may have on sofas, cars or kitchens and bathrooms.

The average interest rate on a credit card is around 20%, but on a standard fixed remortgage is around 4%, which makes a huge difference to your monthly repayments, and will save you money in the long run.

Of course choosing to consolidate your debts this way is only any use if you then don’t re-run up huge debts on the credit card after clearing it, but the relief and monthly saving on interest payments should give you more money to spend, even after paying extra on your remortgage after taking out a larger mortgage to release the equity.

Not everyone is able to remortgage their home in such a way, and you must have equity in your home to release equity. To work out how much equity you have in your home you must first work out the value of your home, and take the value of your mortgage away from this. So someone who has a £125,000 home with a £80,000 mortgage has £45,000 equity in that home.

The important thing when consolidating your debts through remortgaging is to work out whether you will save money on a monthly basis, even if the mortgage interest rate increases by a couple of per cent. In the vast majority of cases the answer will be yes and remortgaging can be a very effective method of debt consolidation.