Property Investor Tips
Consolidating your debt could ease financial pain
Posted on Wednesday, January 13 2010 at 5:01 PM
Refinancing might seem like too much trouble but it can be beneficial for homeowners, according to a mortgage broker.
Ivan Karamatic of Loan Market Group says there's often an increase in people looking to refinance at this time of year because they've had a more expensive holiday season than anticipated.
He says consolidating debts can ease the financial pain and refinancing is a popular option for mortgage holders to offset increased credit card expenses and other debts.
"Debt consolidation combines several loans into a single loan, assisting you to manage repayments, reduce interest rate costs and control your debt," he says.
"Typically, debt consolidation combines unsecured debts such as personal and car loans, credit card balances and store card balances into your home loan, securing the debt with your property."
Karamatic says there are numerous benefits to refinancing, especially taking the opportunity to reduce debt on credit cards, which often have interest rates more than triple that of an average variable home loan.
"Among the other benefits is the chance to reduce your monthly interest rate outgoings and get back in control of your debts," he says.
"For example, a $10,000 credit card debt at an interest rate of 18 per cent per annum with repayments of $300 per month would take four years to repay with a total interest bill of more than $4000."
"By consolidating the same debt into your home loan and maintaining the extra $300 per month repayment if possible, the same debt would be repaid in just over three years with an interest saving of more than $3000."
Karamatic does warn, however, that there are fees and charges associated with increasing your home loan, which will typically add up to around $300 to $400.
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