When you refinance your home loan, you take out a new home loan (preferably with better terms) and use this new loan to pay out your current home loan as well as any of your other high-interest debts. In this way, you can consolidate your current monthly debts into a single repayment.
Before deciding if this is the right solution for you, you need to weigh up the pros and cons. Debt Negotiators is here to help. Our expert mortgage brokers understand the ins and outs of refinancing your home loan to consolidate debt and can help you find the solution that’s best for your budget.
Is it common to refinance a home loan in Australia?
Homeowners across Australia are refinancing at an all-time high, with much of this growth being attributed to owner-occupiers looking for better deals according to The Australian Bureau of Statistics.
Many choose to refinance when their introductory or fixed rate period expires. Sometimes when the fixed term expires, homeowners are left with a standard variable interest rate that is higher. Whether they negotiate their current loan with their old lender or move on to a new lender, they may significantly reduce their home loan repayments by refinancing.
Some also refinance to consolidate debt for lower interest rates and thus lower interest repayments. Again, this can be done with an existing lender or a new lender.
Can I refinance my mortgage to consolidate debt?
If you feel like you’re drowning in debt and own property, consolidating your debt by refinancing your mortgage may help you get back on your feet. You can consolidate a range of small debts, such as your car loan, credit cards, overdrafts, personal loans, ATO tax bills, equipment or furniture purchases and/or a home loan, into one.
A home loan is usually available with a substantially lower interest rate than credit cards or personal loans, making this an efficient and often more convenient way to pay off your debts. You may also be able to lengthen the term of your loan to reduce the monthly payment so it is more manageable.
Should I refinance my home loan?
Having multiple loans or debts equates to having multiple payments with different interest rates that need to be managed monthly. If any of these debts have variable interest rates, then budgeting for them could be difficult and time-consuming. By rolling all those debts into a new refinanced mortgage, you can reduce both your monthly repayments and your interest rate on that repayment making them more affordable.
Is it a good idea to refinance my home loan to consolidate debt?
To refinance your home loan you need to negotiate a good deal with a financial institution or bank who are willing to refinance you for both your home loan and your additional debts. When looking at this option, you need to consider the cost to refinance, such as the standard fees and charges, lender fees, interest charges, break costs and exit fees.
Debt Negotiators is here to help you source the most affordable mortgage-refinancing loan so that you get competitive rates and an affordable monthly repayment. Before you start, you need to consider your options carefully.