Debt Consolidation & home loans

Why consolidate personal debts into existing home loan?

Most people have several personal loans. This may include: unsecured loans such as holiday, wedding or medical expenses, and secured loans such as: car loans, boat loans, electrical equipment or office equipment. In addition to this there may be credit cards and store cards. All these loans have various interest rates which are always higher than your home loan interest rate.

By consolidating all these loans and credit cards into your home loan you will achieve a significant reduction in your monthly repayments.

There are several benefits when consolidating your debts. Firstly, you will only have one single loan instead of several loans, which will make your debt management much easier.

The more you owe in personal loans the more you will save when you consolidate those loans into your mortgage. This type of debt consolidation is only possible if you have enough equity in your home loan. By equity we mean that the value of your home is more than your mortgage.

For example, if the value of your home is $300,000 and you owe $200,000 to the bank, your equity is $100,000. When consolidating your unsecured loans into you home loan, the amount of the consolidation can not exceed 90% of the value of the home. Using the example above, you could consolidate $70,000 of your personal loans into your mortgage. After debt consolidation you would only have a mortgage of $270,000 and no personal loans or credit cards.

Another example below shows total savings when consolidating your personal loans into your home loan.

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