Can I refinance to consolidate debt into my home loan?
Yes, if you can meet the following criteria:
- On time home loan repayments for the past 6 months.
- On time credit card and personal loan repayments for the past 3 months.
- No missed repayments with the bank that you are applying with.
- However, if you do not have equity in real estate, you will not be able to consolidate your debt.
- A strong financial position so that you have the ability to repay the loan.
- A stable employment history.
- A good credit history.
- You need to prove that you will stay in control of your debts in the future.
Was this a one off event?
Lenders will be concerned if you are living beyond your means or are experiencing financial hardship from which you will not recover.
To mitigate this, we use various methods to explain to the lenders that this is a one off event.
If you have had serious credit impairment, then you must prove that you can afford the new loan amount.
If you don’t meet the above criteria we may still be able to get you approved with a specialist lender.Bear in mind that a higher interest rate will apply depending on how much debt you’re consolidating and your credit file.
Our mortgage brokers work with both banks and specialist lenders. Speak to us today on 1300 889 743 or enquire online.
How much can I borrow?
- If you have a clean credit file and all of your repayments have been on time then you can borrow up to 90% of the property value.
- If you have missed payments but, overall, are repaying your debts, you can borrow up to 80% of the property value.
- If you have serious credit impairment or you’re missing payments on all of your debts, you can borrow up to 75% of the property value.
- Standard home loan rates available if we can get you approved with a major lender.
- Make more affordable repayments with lower home loan rates.
- Improve your cash flow and savings position.
- Manage your debt more effectively.
- Prevent creditors from pursuing you for funds and protect yourself against the risk of bankruptcy.
- Above all, live a happier, less stressful life!
What if I don’t have enough equity?
There may still be some options available to you. In some cases, we can apply to have part of your debt written off and the rest of your debt consolidated into your home loan.
This option isn’t available to all borrowers, please contact us for more information.
Can I consolidate debt into a first time home loan?
Yes! First home buyers can consolidate their existing debt into their home loan using a guarantor.
In this way, you can borrow 100% of the property value, 5% for the associated purchase costs and up to 5% in debt.
Essentially it means that you can borrow up to 110% of the property value.
It all depends on whether your parents own their own property and how much equity they have available.
Please call us on 1300 889 743 or fill in our online enquiry form and we can let you know if you qualify.
Speak to us!
Managing debt is easy if you get in touch with professionals. We know how the lenders that will consider your situation so we only submit your application with the right lender, to ensure that you get approval.
Don’t wait until you are buried deep in debt, we can help you take control of your finances:
- We can order a free valuation upfront.
- We know which lenders are lenient with debt consolidation.
- We know which lenders can accept missed payments and impaired credit (a higher interest rate will apply).
What is debt consolidation?
Debt consolidation is the process of combining all of your debts into one loan.
Most people choose to roll multiple forms of unsecured debt into their mortgage, creating one simple monthly repayment.
Since you are making one monthly repayment, you’re effectively reducing the interest you’re paying on your more expensive debts making it an attractive option.
Why would I choose to consolidate my debt in to my home loan?
If bills are rolling in and you have lost count of how many accounts are due it may be time to consolidate your debts into one loan.
Most people tend to ignore the state of their finances until consolidation is no longer an option and then find themselves signing a debt agreement.
Applying for a debt consolidation loan now will help you regain control of your financial situation and reduce your debt.
The other benefit of consolidating debt is to improve your cash flow and get back on top of living within your means and making regular savings contributions.
Debt consolidation is not a silver bullet
Debt consolidation doesn’t reduce your level of debt. It simply allows you to better manage your repayments.
A debt consolidation strategy should be implemented in combination with a change to your spending behaviour so you work towards reducing your overall debt level over time.
The ASIC MoneySmart website has a great budgeting tool that helps you to track your spending, and there are plenty of other resources available online.
Debt consolidation case study
If Peter has a mortgage and a personal loan, he will be making multiple debt repayments every month.
Each loan has interest but the personal has a particularly high interest rate.
For his $30,000 personal loan at a rate of 15% per annum, it will cost him $12,882 interest over his 5-year loan term.
By consolidating his personal loan into his home loan, Peter now has one monthly repayment with a lower interest rate.
However, it’s important to keep in mind that by doing this, the payable interest will inflate to $27,977.
Types of debt we can help you to consolidate
Almost everyone has a credit card these days. People shop, travel and fund their lifestyle at the swipe of a card.
Did you know a credit card debt of $15,000 at 18.50% per annum will take 63 years to repay if you make only the minimum monthly payment of 2% per year?
If you consolidate your debt into your home loan you can pay it off faster and at lower interest rates.
You can also increase the term of your home loan, giving you more time to repay your credit card debt.
However, you may wish to make larger repayments and pay it off faster, decreasing the amount of interest payable. The choice is yours!
Do you have a personal loan? You may have taken out the loan to pay for a holiday, purchase a car or furnish your home.
Most people don’t know that personal loans carry very high interest rates, often with short repayment terms.
Rolling your personal loan into your home loan is extremely beneficial.
You can manage your loan, reduce the amount of interest you pay and have a longer repayment term.
It’s possible to consolidate debts to the ATO, private debts or other loans on a case by case basis.
This would depend on your equity position and the overall strength of your situation.
Other debts that we can help consolidate include cash advance debts and store credit purchases.
Should I be worried about the interest rates?
Standard discounted interest rates and competitive loan packages are available.
We will try and get you the best rate possible for your situation with a debt consolidation loan that suits your needs.
Can I extend my loan term to further reduce my repayments?
Extending your loan as part of the debt consolidation can cost you considerably more over a 30-year term than if you were to keep you current loan term.
You should factor this in if your plan is to reduce your repayments over the short-term.
Close your old credit balances
Whether you’re rolling credit cards or personal loans into your home loan, many borrowers make the mistake of keep their credit facilities open.
There is nothing wrong with keeping these balances open specifically but you may continue to be charged an account-keeping fee.
More importantly, you may be tempted to continue using your credit accounts and run up even more debt.
You should consider your financial situation and spending habits to ensure that you avoid falling into a vicious cycle that will affect your borrowing power for years to come.
Pay off your refinanced debt as quickly as possible
Consolidating all of your debts into your mortgage increases your loan balance and means your repayments will be even higher should interest rates suddenly rise.
This is known as concentration risk.
The best approach is take advantage of all available savings you have to make additional repayments to pay off your new debt as quickly as possible.
You may be required to pay Lenders Mortgage Insurance (LMI) if you borrow above 80% LVR (80% of the property value).
If some of the debts that you are consolidating have a fixed interest rate then you may need to pay break fees, however for small car loans or personal loans this is normally a low amount.
Set up fees for the new home loan are typically under $500 and are often completely waived if you choose a professional package.
How long do I have to pay off my loan?
The choice is yours!
Once you have consolidated your debts you can choose to pay off the debt over a 5 year term, which will save you on interest.
Alternatively, you can include the debts as part of your home loan term over the 30 year period.
We recommend that you maintain your current repayments with your new low interest rate. This will help you save money over the life of your loan.
How do people get into debt?
With the cost of living rising, it is very easy for people to get into debt.
People often take on too many financial commitments and overspend on items and luxuries that they would otherwise not be able to afford without the use of a credit card.
More and more people are living beyond their means.
In other circumstances, individuals manage their money responsibly but fall into debt due to unexpected circumstances such as divorce, sickness or temporary unemployment.
If this sounds like you, then debt consolidation will work for you!
If you overspend, you will need to adjust your budget before consolidating. Read on to find out more.
Have you consolidated debts more than once?
Do you spend more than you should? If you have irresponsible spending habits, you will need to change these once you consolidate your debt.
If you have already consolidated and have taken on more financial commitments, then the banks will view you as high risk.
They are unlikely to approve your loan and will not bail you out this time.
Letting it get to this stage will leave you having to pay a huge amount at high interest rates.
Break out of this cycle and manage your finances today by speaking to Debt Fix, professionals in debt consolidation and management.
See a debt counsellor
If you are falling into debt, it may be helpful to see a debt counsellor.
They will educate you on ways to save, budget and plan out your spending in line with your income.
The process that they put in place will help you manage your debt and prevent you from falling into bankruptcy or having to resort to a debt agreement.
If this occurs, your credit file will be substantially affected.
Seek help and you can avoid future financial complications and stress.
Apply for a debt consolidation loan today!
Think you’re ready to consolidate?
There is no substitute for expert advice!
Call us on 1300 889 743 or enquire online. We are the experts in bad credit loans and can help you regain financial control through debt consolidation. Speak to us today!