Using A Home Loan For Debt Refinancing
Tuesday November 25, 2008
If you are intending to take out a home loan, you may wish to consider refinancing your other existing debt as a part of your new home loan. Home loan rates can often be lower than the rates for other debts and having all of your debt in the one place makes your debt structure much simpler. Your minimum monthly expenditure on debt can also be reduced, due to the possibility of having to pay less in fees.
It's not all good news, though. Home loan refinancing can potentially lead to paying more in interest in the long run. If adding the other debt to your home loan makes you extend the term length of your home loan, you may find that the extra years you are paying off your home loan could rack up more interest charges, especially if you do not make extra repayments on top of your compulsory monthly or fortnightly repayments.
Using personal loan and home loan calculators to determine the overall interest you are likely to pay by refinancing your debt into a home loan compared to keeping your debts separate could be a good idea. It is important to take fees into account as well, however, as debt consolidation can save you a significant amount on fees.
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