Debt Consolidation Loans

Mortgage loans are used for a variety of purposes. While the main purpose is home buying, these loans are often used to help consumers consolidate and eliminate debts. If you have a home with some equity and overwhelming credit card or consumer debt, you might benefit from mortgage consolidation or debt consolidation loans. However, this process can be challenging since it requires full mortgage underwriting and verification by the debt consolidation company you have chosen.

Why Refinance?

Debt consolidation by refinancing your home loan has multiple benefits, depending on your circumstances. Some reasons that you may look to do this include:

  • It could help you manage a range of other short-term debt solutions that usually attract a higher interest rate. This could include existing Credit Card, Store Card or Personal Loan debts.
  • The ease of managing a single loan gives you a regular repayment amount
  • Unlocking equity at a lower rate could be a smarter way to fund renovations on your existing property

What are your goals?

  • Are you refinancing to reduce your interest rate or to pay off your loan faster?
  • Are you looking to access the equity in your current property for renovating, to purchase an investment property or because you want to free up some extra cash?

Home loan interest rates are generally lower than the interest rates charged on credit cards or personal loans, so by rolling these debts into your mortgage, the total amount that you have to repay each month will reduce. You should consider debt consolidation loans to refinance when you have high rate credit card debt and a first or second mortgage above 5%. With fixed mortgage rates starting at 4% there is a significant opportunity for you to lower your monthly payments and increase your savings!

 

Example Scenario 1: Before consolidating your debts*

Type of loan

Amount outstanding

Interest rate

Monthly repayment

Home loan

$210,000

7.50%pa

$1,468

Car loan / Lease

$24,000

9.00%pa

$498

Credit card 1

$15,000

17.00%pa

$373

Credit card 2

$6,000

15.00%pa

$143

Personal loan

 $18,000

12.00%pa

$474

Total

$273,000

$2,956

Example Scenario 2: After consolidating your debts into your home loan*

Type of loan

Amount outstanding

Interest rate

Monthly repayment

Home loan

$273,000

7.50%pa

$1,908

Total

$1,048

 

In order for debt consolidation loans to work properly and to have the most beneficial effects, it’s essential to avoid accumulating additional debt. Otherwise you may find yourself in an even worse position with credit card payments and loan obligations on top of your already refinanced mortgage payment; this can lead to serious financial problems including defaults and even bankruptcy in some cases. Debt consolidation through mortgage refinance should be viewed as an opportunity to begin again financially and to make responsible budgeting choices, not as a chance to begin the cycle of excessive debt once again. For most people, consolidating all their debts into their monthly mortgage payment can provide the second chance they need, allowing them to handle their current financial obligations and to build a more secure financial future.

The GLM Mortgage Group can help you understand the pros and cons of refinancing credit card debt with a secure home loan. Now you can consolidate 1st and 2nd mortgages and refinance your debts and loans or take out a second mortgage to finance cash for credit card consolidation and reduced monthly payments. Our team will help you select the right debt consolidation company for refinancing regardless of your credit score or poor credit history.

Refinance your 1st Mortgage and home equity loan together for one low payment! The beauty of using a mortgage brokers is that we customized your mortgage for you personally and at no cost! Call GLM Mortgage Group to get more information, we are here to help you.