More importantly, you could be paying more each month than necessary. That’s because your personal loan and credit card could charge interest rates twice as high or more, than the rate you’re currently paying on your home loan. A smart way to save can be refinancing your home loan to consolidate different debts.
Let’s see how it can work.
We’ll say Sue has a home loan of $200,000 with a rate of 5%. She has a $15,000 personal loan costing 12% and $5,000 is owed on her credit card – attracting interest of 18%. All up, Sue pays around $1,600 in monthly repayments.
Now let’s see what happens if Sue refinances her home loan to consolidate all these balances into one low rate loan. Instead of juggling different debts, Sue only has to manage her home loan, now worth $220,000. And instead of paying rates as high as 18%, she pays just 5%.
By refinancing this way, Sue will pay a single monthly repayment of $1,286 – that’s over $300 less each month than she was previously paying. This gives Sue extra money to live on. Or she can use the extra $300 she now has available each month to pay off her home loan sooner and save more in overall interest.
The potential downside would be that Sue would be paying for short term debt over a longer period. However, your local Mortgage Choice broker can work on the best plan for consolidating your debt that suits your situation. Why not talk to them today to find out more?
Get the right home loan advice at no cost to you. Talk to your local Mortgage Choice broker today.