02 Dec 2021

It is not uncommon for people to find themselves with a multitude of debts that over time become increasingly more difficult to manage. Whether it be credit cards, store cards, car loans, personal loans or even Buy Now, Pay Later facilities, it can be a slippery slope for some who don’t think twice about opening a new credit account.

But the reality is they all need to be paid no matter how overwhelmed you get. That is where consolidating your unsecured debts into your home loan may be worth considering if you are finding that managing your commitments is being increasing more difficult.

When Should I Consider Consolidating My Debt?

If you are struggling to manage your repayments and it is restricting you from doing other things then debt consolidation could very well be the answer. Refinancing your debts into a home loan will mean not only that you will only have one repayment to manage but it should also be considerably lower.

Interest rates on unsecured debts are considerably higher than residential home loans so the interest savings will undoubtedly be significant. It is important however to investigate the break costs from paying out any facilities first to confirm what the net result will be.

How Can I Consolidate My Debt?

Making the decision to consolidate your debt into your home loan is the first step, however your next move should involve speaking to your mortgage broker. Your broker will need to confirm that firstly your equity position is viable to borrow against and will seek to order a valuation with your lender to verify this. If your bank’s valuer does not return a favourable result, then there is the option of ordering valuations through other lenders to see what their valuers return.

The next piece of the puzzle is to confirm you can service the additional home loan limit based off the bank’s servicing metrics. If both the valuation and the servicing are all satisfactory then your mortgage broker can assist you in applying for a new loan, whether it be extending your current facility with your existing lender or applying for a new one elsewhere.

What Else Should I Know?

Make sure all your commitments are in order before you seek to refinance them into your home loan. If there are late payments, particularly with a degree of frequency, you may struggle to get your loan approved. Make sure you are up to date with your repayments and there has been no delinquencies.

When taking out a new loan with your mortgage lender you probably want to ideally keep the loan term as low as possible. For instance its probably a false economy to pay out a personal loan that only has a year or two remaining on its term with a new facility having a 30 year loan term. Your mortgage broker will be able to run the numbers to demonstrate what is the most efficient way to pay the loan out.

If debts are overwhelming you, then having one loan with one interest rate and one repayment may help streamline your finances and help you get ahead. Contact our team for more information.

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