If you are struggling to pay off multiple loan repayments or other debts, you can refinance your existing mortgage to consolidate your debt. This is a simple process, and it can help you reduce your monthly repayments. Instead of making multiple monthly repayments for all of your loans and debts, you make just one repayment encompassing all of them.
How to Consolidate Debt
You can consolidate debt by refinancing with either your current lender or with a new one. In general, the application process is easy, as long as you meet specific criteria, including:
- Regular, on-time mortgage repayments for the last six months
- Regular, on-time credit card and other loan repayments over the previous three months
- No missed repayments
- Stable employment, secure income, and a solid financial position
- Strong credit history
Pros and Cons
While consolidating all your debts into your mortgage is a popular choice for Australian homeowners and is a simple process, there are some pros and cons you should be aware of. For instance, your repayments will be more affordable, especially if you have lower home loan interest rates. However, your loan term is usually for a longer period, meaning you may pay more interest in the long run. In addition, while your monthly repayments may be reduced, if you default for any reason, your property will be at risk because a mortgage is a secured loan. Once you sign the mortgage paperwork, the bank owns the home until you repay the mortgage in full.
If you are considering consolidating your debts into your home loan, consult with the brokers at Mortgage House first. We are experts in the lending process. We can look at your financial situation to determine whether debt consolidation and refinancing are in your best interests.
