Rolling everything into one payment can mean the difference between getting on top of debt and juggling payments for years. But is it really worth stretching your payments out over a longer term – Don’t you pay more in interest?
Is it worth it?
Everyone’s situation is a little bit different. If you have equity in your property you can usually consolidate debt – and if so it’s generally at a much lower rate.
Case Study: how you can take 6 years off your mortgage by consolidating debt and still reduce your repayments
A young Wellington couple who refinanced recently were able to save money by combining their credit cards into the home loan. Since moving into the home they had started a family and run up some credit card debt – some of which was incurred when they initially furnished the property after moving in and the majority when they were down to one income with their newborn.
- A home loan of $350,000 (repayments of $1929/month on their expiring two year fixed rate of 4.8%) with a full loan term of 27 years to run.
- $15,000 on credit cards (minimum combined repayments of $350/month and a rate of 19.9% on one card) – making only the minimum repayments would mean it would take until 2025 to repay both cards.
Total monthly repayments of $2215/month.
Their property was worth close to $500,000 so with comfortable equity in the property and the benefit of moving to a much lower fixed rate of 4.10% they were able to set monthly repayments at $2163 and take their loan term down to 21 years.
Not enough equity? You can split with a personal loan
Your Home Loan partners with personal loan providers with rates from 9.9%. It can give you the extra flexibility you need.
Personal loans can also be useful if you are trying to preserve equity in your property for future investment or renovations.