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A common recommendation for people who go into a large amount of credit card debt is to extend the mortgage on their house and use it to pay off their credit cards. This will only work if there homeowner has some equity in their house. Although this can be a good solution at some times, caution has to be used.

A secured loan has a lower interest rate than an unsecured loan as these loans are more likely to be paid back. Re-mortgages are easier to administer as they have fewer movements than a credit card and are larger. As the debt lasts longer then there will be lower repayments made every month. Another advantage over a number of credit cards is that a single repayment can be paid off at the same time as a monthly repayment.

A problem with this sort of loan that is used to cover credit card debt is that it increases the borrowing ability of the home owner. This is because the cards are now able to be used and so can soon find that they have as much debt as before, while there is additional debt on the house. This can mean that it is a good idea to wait until the borrower has got into the habit of paying back debt before using consolidating the debt on to the card.

A problem that borrowers find is that whereas credit card debts would not put the borrowers at risk of losing their home, this can happen with a secured loan. Another disadvantage is that this can increase the overall cost of the existing mortgage. This is because there will be a higher proportion of debt on a house. So if a home loan is available for 5% on a 60% mortgage but it is 6% on an 80% mortgage, the additional interest rate is not 9% and not 6% on 20% of the loan. This extra cost has to be added to the loan interest on the extra amount borrowed.

Mortgage insurance may also become due on home loan if the loan to value ratio goes up. Mortgage insurance covers the mortgage lender if a borrower were to default on a home loan.

Another problem with taking out a new loan is that it could mean that there will be a revaluation of the house that is being used for the loan, which may result in a lower house price and so a higher loan to value ratio. This will in itself increase the costs.