What is it? With a debt consolidation you roll all your loans/debts into your mortgage. Debt consolidation is often viewed as a solution for Australians facing heavy debt burdens from credit cards, store cards, personal loans and even home loans.
How does it work? You save money on interest because all your debts are rolled over into your mortgage rate, which is usually lower than other interest rates. It also serves to reduce your fees because you are paying the one fee.
The facts about debt consolidation
- Make sure that the interest rate, fees and costs are significantly less than the debts you are consolidating. That will ensure that you are actually saving money.
- Watch out for hidden costs such as application fees and legal work. Also if your debt consolidation is against your home, you may have to conduct another valuation and pay more stamp duty.
- If things go wrong with the new debt consolidation under your mortgage, you expose yourself to the possibility of loosing your home.
- Because debt consolidation may allow you to borrow more money, you may wind up in even more debt if you are not careful.
- Before consolidating your debts, check with your mortgage broker to find out if it is the best option for you. They may be able to recommend other options that are more suitable for your situation.
For more information on home finance in your best interest, simply complete a contact form and we will have a home finance broker in contact with you within two business hours. Alternatively, call us at any time on 13LOAN or for overseas callers +61 2 90188417.
