How do I go about consolidating my debts into a mortgage?

When you are struggling with mounting unsecured personal debt it can be extremely difficult to manage your financial life.

If you have multiple debts with varying interest rates, different repayment dates and all owed to different creditors it can be almost impossible to manage.

One of the most effective ways of simplifying your financial
situation is through consolidating your unsecured debts into your mortgage.

If your financial circumstances permit, you can combine your various debts into one single debt. This will allow you to make one payment every month subject to one interest rate and to one lender. Consolidating your debts can also give you more time to make the repayments, giving you much needed breathing space.  

If you have a mortgage, consolidating your unsecured debt into your mortgage may result in significant interest savings as mortgages typically carry a much lower interest rate than most other debts. The savings are particularly high when compared with credit card interest rates– 7-8% for a mortgage as compared to 20-30% for credit cards.

Do you have equity in your home?
In order to be eligible to consolidate your unsecured debt into your mortgage you will need to have equity in your property. Although in might not seem appealing to relinquish any of the equity you have built up in your property, it might make financial sense to do so.

For example, if you have $20,000.00 worth of unsecured personal debt subject to an interest rate of 20 per cent and you received a consolidation loan against the equity in your property subject to an interest rate of around 8 per cent, which you use to pay out your unsecured debt, in the long run you could potentially save thousands of dollars.

How about the costs?
There are costs associated with creating or refinancing a mortgage and depending on the contract these can be quite substantial. You may have to pay the lender’s administrative fees, home valuation charges and possibly break-charges on your old debts.

As a result it is important that you make sure that a mortgage or a mortgage refinancing loan is beneficial for you. Before deciding on a mortgage or a mortgage refinancing loan you should do a cost benefit analysis. You need to ask ‘will the total savings add up to more than your costs?’ Only if the answer is yes does it make economic sense to opt for the loan.

What else do I need to consider?
You should evaluate your capacity to service the mortgage on time. You always need to remember that if you fail to make your repayments your mortgage lender may be forced to take possession of your house. You do not want to put yourself into a situation where a mortgage refinancing loan places you in a worse position than you were in before.  

Mortgage refinance can help you to combine all your debts into a single payment, with extended payment terms and a lower interest rate. Mortgage refinancing can allow you to convert the equity in your property into a loan, which allows you to clear all the other debts you have. It is important, however, to consider the costs and your ability to service the loan before you apply.

To Find Out More Contact Us on 1300 760 718

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