Can you use a personal loan to pay off a mortgage?

Emily Tye

Written byEmily Tye

Updated:Dec 23, 2025

3 min read

A personal loan can be used for many expenses, but it isn't a good idea to use one to pay off your mortgage.

For starters, some lenders will have clauses in their personal loan agreements to stipulate that they can't be used for mortgage repayments.

But even if that's not the case for your specific loan, there are major downsides to be aware of. For example, interest rates on personal loans are usually higher than mortgage rates, they have shorter repayment terms, and are rarely large enough to cover an entire mortgage.

Why using a personal loan for a mortgage isn’t ideal

1. For one, many major UK lenders explicitly state that their personal loans cannot be used for regular mortgage payments, property purchases, and mortgage deposits.

2. Secondly, you’ll get quoted higher interest rates. Mortgage rates are typically 3-5%, while personal loan rates can be 8-15% or more!

  • According to Rightmove, as of December 2025, the average mortgage interest rate was 4.31% for a two-year fixed term mortgage, and 4.39% for a five-year. The lowest rate was 3.47%.

  • On the other hand, according to data from the Bank of England, the average rate on personal loans was about 8.34% in November 2025. That's already nearly double the average mortgage rate, but they can be much higher.

3. They will likely have shorter repayment terms. Typically, personal loans must be repaid in 1-7 years, unlike mortgages, which can have 20+ year terms.

4. Lastly, there’s always the risk of rejection. Lenders may see it as risky if you take out a loan to pay a secured debt (your mortgage).

Some better ways to pay off your mortgage faster

  • Overpay your mortgage: Many lenders allow you to make extra payments without penalties.

  • Remortgage for a better rate: Switching to a lower interest rate can reduce costs.

  • Use savings instead of borrowing: If you have cash savings, using them is better than paying loan interest.

When might a personal loan be worth it?

In very rare cases, and if allowed by the lender, a personal loan might help if you need a small lump sum to cover a final mortgage payment, or you have a high-interest mortgage, and the loan rate is lower. But in almost all cases, other financial strategies are better.

The bottom line:

Using a personal loan to pay off a mortgage isn’t advisable due to higher interest rates and shorter repayment terms. Instead, consider overpayments or remortgaging to save money.

This blog is for informational purposes only and does not constitute financial advice. Please speak to a qualified financial adviser before making financial decisions.