Using the equity in your home can be an attractive way to consolidate debt and reduce repayments. Many lenders will consider allowing borrowers to draw-out cash from their property to repay debts such as personal loans, car loans and credit card debts. Why is this an attractive option? It’s all about the interest rate. Unsecured personal loans may cost around 15%pa, while the interest charge on credit card bills not repaid in full is usually in excess of 20%. This contrasts with current home loan rates of around 4%.
Lenders will check that the borrowers can afford the increased home loan size, and will stress-test this borrowing to ensure it remains affordable if / when interest rates rise. Borrowers may also face some restrictions or increased costs if they wish to increase their borrowing above 80% of their property value.
Different lenders have different policies on debt consolidation. Call Mortgage Choice on 03 9021 6904 to discuss your situation.