Debt Consolidation With Your Mortgage
With the availability of credit, you may have a car loan, credit cards, or other debt starting to mount, and maybe taking a toll on your budget. For some, it can be easy to max your credit card, get that new car loan, but then find it hard to keep your payments under control. You may want to consider increasing your mortgage to pay these debts out. This will not only reduce your monthly commitments but also ease the strain on your monthly budget.
If you are thinking about consolidating other debts with your mortgage, you may have questions like:
Can you consolidate your current debts into your mortgage?
Will my current bank or lender allow me to do that?
What will be my monthly repayments on my increased mortgage?
Banks or lenders lend against the value of your home, do you have enough equity in your home to increase your mortgage to pay out those debts?
There are many options if you are thinking about consolidating your current debt into your mortgage. It is important to speak to a qualified Mortgage Broker to see which option suits your financial situation. A Mortgage Broker will look at your current bank or lender, and if that doesn’t suit you, look at different banks and lenders they deal with, so they can explore many different options, and find one that suits you best.
What Type Of Debts Can You Consolidate With Your Mortgage?
All banks and lenders have different rules about what you can consolidate into your mortgage. It is important to get some information from your Mortgage Broker first, so you can learn what you can do, and then make an informed decision on what is the best option for you. Some of the types of debt you can consolidate are –
Credit Card Debt.
Car loans or personal loans.
Business Debt.
Tax Debt.
Investment Debt.
What Are The Advantages and Disadvantages Of Consolidating Other Debt With Your Mortgage?
Some advantages and disadvantages of consolidating your current debts with your mortgage may include –
Advantages
Your interest rate on your mortgage is more than likely cheaper than credit cards and other loans, saving you money.
Your monthly commitments (repayments) may be reduced, helping your monthly budget out.
You may want to make a plan to pay that debt down faster by consolidating it into your mortgage, and paying more than the minimum repayment, thus saving you money and interest charges.
Disadvantages
Although your minimum monthly repayments may have been reduced, some of the debt in the longer term may cost you more money. For example, a car loan may have been taken over a 5-year loan term, but on your mortgage, even though the interest rate may be cheaper, your mortgage may be over a term of up to 25 years, therefore increasing the amount of actual interest you pay on the original car loan, as it is now paid over the remainder of your mortgage term.
Reduces the equity in your home. This may be an issue in the future if you want to buy another home, investment property, etc.
There may be a fee to increase your mortgage or refinance your mortgage to another bank or lender.
It is important to talk to a Mortgage Broker, and determine what may be best for your financial situation before you make any decisions. This way you can learn the pros and cons of consolidating other debts into your current mortgage and make an informed decision.
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