Debt consolidation allows homeowners to combine one, two or all of their debts into their mortgage payment. You may find it helpful if you have multiple loans, have difficulty keeping track of when bills are due and if the interest rate on your mortgage is lower than on other loans. With a debt consolidation home loan, your home acts as security, ensuring that your monthly repayment is made on time and allowing you to reduce your debt.
Debt Consolidation basics
High-interest, unsecured debts are the best ones to consolidate into your home loan because your home loan tends to have a lower interest than this type of debt. Some examples of these debts are:
- Personal and car loans
- Credit and debit cards
- ATO tax debts
- AfterPay and other kinds of buy now, pay later services
Qualification Criteria
In general, when banks are assessing your consolidation application, they look for these criteria:
- Six straight months of regular, on-time home loan repayments
- Three consecutive months of standard, on-time credit card and personal loan repayments
- Secure financial situation
- Stable income and employment
- Strong credit file
Debt consolidation can improve cash flow, reduce stress and help you manage your finances more effectively. Depending on the bank or lender, you may be able to consolidate between $50,000 and $100,000 worth of debt. Some specialist lenders may allow you to combine more, as long as you have enough home equity to cover the amount of debt.
Before you apply for debt consolidation, talk to the brokers at Mortgage House. We are experts in the mortgage process. We can help you weigh the pros and cons, discuss your qualifications and see if debt consolidation is right for you.
