A Consolidation home loan is similar to a refinance and
is when a client refinances their existing home loan and
at the same time does a consolidation of their debts. The
debt consolidation could consist of the existing home loan,
personal loan(s), credit card debt, bills (rates, school
fees, etc) and also extra finance for future use (holiday,
upgrade car, home improvements etc).
The reasoning behind consolidating the existing home loan
is to use the equity in your property to qualify for the
low interest rate loan, rather than be charged much higher
interest rates, on personal loans and credit cards.
The desired outcome of a loan consolidation is to have
only one debt; on a low interest rate home loan, with a much
lower minimum payment required.
This provides for financial peace of mind.
Once the consolidation loan is approved it is advised that
credit cards be cancelled or at least reduced to a minimum
limit.
Example of a Consolidation loan:
| |
Balance |
Payment |
| Existing Home Loan |
$150,000 |
$998 |
| Car loan |
$13,000 |
$690 |
| Credit card |
$8000 |
$240 |
| Credit card |
$6000 |
$180 |
| |
|
|
| Current monthly payment |
|
$2108 |
| New lower monthly payment |
|
$1178 |
| |
|
|
| Reduce your monthly per month by |
|
$930 |
The new consolidation loan still gives you the option
of continuing to pay more than the new lower minimum payment
of $1178 per month, thus saving on interest and owning your
home years earlier. For example, if payments of $2108 were
continued to be paid monthly on the new loan the loan would
be finalised in 9.64 years.
|
