Extra cash is always welcome and refinancing your home loan to consolidate debt can put serious savings in your pocket.
What is refinancing?
Refinancing simply means replacing your current home loan with a new loan.
What is Consolidating Debt?
Is combining debts into the one loan to make for lower repayments and/or the ease of dealing with one lender.
How to consolidate debts into my home loan?
Lenders allow for your home loan to increase if your total loan remains under 90% of the value of your home. Ideally it is best to keep the loan below 80% to avoid lender’s mortgage insurance. As you pay off your loan or your property increases in value the option to consolidate other debts into your home loan is an attractive proposition for many.
Here is an example
Mary and Bob have three different loans
- 30 year Home loan of $250 000 at 4.5% Repayment = $1,266/month
- 5 year Personal Loan of $10 000 at 12% Repayment = $ 143/month
- Annual Credit card debit of $5,000 at 18% Repayment = $ 458/month
Total repayment =$1,867/month
If Mary and Bob consolidated their debt into their home loan
30 year home loan of $265 000 at 4.0% Repayments = $1,265/ month
This equates to over $602 each month in their pocket.
If they were able to continue to pay the higher amount of $1,867 each month they would be looking at owning their home in just 17 years.
With the fantastic low interest rates that are around at the moment, it would be savvy to look at refinancing to another lender with a sharper rate.
As your home loan experts we could review over 20 different lenders to find the right loan product and the most competitive rate.
The break costs and establishment fees would need to be considered – to find out more review our previous blog.
As your local Mortgage Choice broker we are here to help. Call today Mortgage Choice in Mudgeeraba on 5559 2563 to find out how consolidating your debt and refinancing may positively impact your bottom line.