Are your debt repayments weighing you down?

Mortgage debt consolidation could make your life easier – and save you money.

We have started 2022, and what better time for a financial health check-up? If you’re a homeowner and you’re sitting on extra debt, you might want to consider rolling it into your mortgage.

Consolidating your debt can be a good way to save money or help you out of a financial bind. When life throws you curveballs, it can make paying back debt harder and more stressful. That’s where mortgage debt consolidation can help.

How mortgage debt consolidation works

When consolidating debt into your mortgage, you’re taking all of your additional debt and adding it to your mortgage. That means you have one repayment to manage, automatically making life easier.

Mortgage debt consolidation may also save you money with lower interest rates, fewer fees and extended terms. For example, a personal loan could have an interest rate anywhere between 10-20%. Compare that to mortgage rates below 5%, and it doesn’t take a lot of calculation to see it could save you thousands in interest (not to mention all the additional fees associated with things like credit cards).

However, even though debt consolidation can be a great way to save money in the long term, there are risks. Let’s have a closer look at the pros and cons:

Start with the positives

Cheaper debt
Consolidating your debt into your mortgage may mean you’ll have lower repayments overall. You can take advantage of lower mortgage interest rates and cut fees from any other providers.

Improved credit score
When you’ve got debt spread across too many lenders, chances are something will have to give at some point. Defaulting can hurt your credit score, making it hard to get good-quality loans with low interest rates in the future. Mortgage debt consolidation will help you stay on top of this by rolling your debt into one simple repayment.

Simplified finances
One repayment also means you don’t have to worry about multiple due dates. Because you’re dealing with a single amount, you can be more prepared, knowing exactly how much to set aside each month.

Pay off debt faster
Most importantly, you could pay off your debt faster with lower interest and a fixed end date. If you can afford to continue paying a higher amount post-consolidation, you’ll be paying off your debt sooner.

Consider the negatives

Missing one payment is a bigger problem

Because this loan would be secured against your house, defaulting on your mortgage is a big deal – and there’s the risk the bank could take more severe action. You would need to make sure that the new terms are easy enough for you to cover every month without fail.

Risk of accumulating more debt
While it may be tempting to relax after successfully consolidating your debt, it’s important to look back and understand how you got there in the first place. To avoid financial trouble in the future, get in the habit of tracking your spending to see where your money is going, and if you notice bad habits creeping in, find a way to fix them and get back on track.

Make sure you speak to a financial expert before making any bigger investments in the future. They’ll be able to tell you how to best manage your money – so you don’t end up in more debt.

Financial success is in your future

The new year is a great time to set new goals for your financial future. If you want to start looking for new projects or investment opportunities, mortgage consolidation could boost your borrowing power by cleaning up your finances, cutting costs from your debt portfolio and improving your credit score.

Struggling to repay debt and need some advice? There are always ways to make your finances easier to manage. Speak to your mortgage broker about whether mortgage debt consolidation is a smart move for you.

Find out more about mortgage debt consolidation by getting in touch with the team at Global Finance today.

**These are general guidelines and are by no means a reflection of bank or lending policies