A quick guide to debt consolidation through refinancing
Refinancing multiple debts into your home loan can help simplify your finances – especially if you’re juggling many loans, each with different repayments, fees and interest rates.
Sounds like a great idea? Before deciding if this is the right choice for you, it is important to understand how it all works. This easy guide details some handy tips on debt consolidation when refinancing, in five simple steps.
Debt consolidation home loans explained
Consolidating debt through home loan refinancing means rolling all your existing debts into a single mortgage. So instead of repaying individual debts with different interest rates and fees for mortgages, cars, credit cards, personal loans and even phone bills, you’ll have just one ongoing repayment to manage each month – which may help save you time and money.
Five steps to refinancing to consolidation debt
Ready to consolidate your debts by refinancing? First, you need to know what to expect.
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Step 1. Make sure it's the right option for you
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Be clear about why you want to refinance. Ideally consolidating your debts means better management of your finances. But If you’re looking for an easy way out of credit card debt, you may want to re-think your spending habits.
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Step 2. Work out all the costs involved with your existing debts
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To make sure refinancing is worthwhile, you'll want to understand all the costs involved with each existing loan. Write down your individual repayment amounts, loan interest rates and all the fees associated with your current debts.
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Step 3. Find out how much you can borrow
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Once you’ve calculated the combined total of your loans, check you’ll actually be able to borrow the amount you need. As a first step, it is a great idea to speak with your current home loan provider as they may be able to review your mortgage and offer you a better deal. To get you started, use our borrowing power calculator to find out how much you could possibly borrow.
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Step 4. Compare different loans
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If you decide to switch to a new home loan you need to make sure you’re really getting a better deal – because the idea is to save money and pay off your debts. Look for a combination of low interest rates and minimal fees. If offset accounts and redraw facilities are important to you, make sure they’re available with your new loan.
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Step 5. Know the fees for refinancing
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Your existing loans may charge exit fees if you pay them off early. There will also be fees associated with opening a new loan. Ask your lender for a complete list of fees that you need to budget for and work out if the upfront cost will pay off in the long run.
Want to find out where you stand? Calculate your Borrowing Power.
Need some help with your refinancing?
There's a lot refinancing can do; from unlocking your equity to consolidating debts to your home loan. Our resources are here to help you understand your options.
You are protected by responsible lending laws. Because of these protections, the recommendations given to you about home loans are not regulated financial advice. This means that duties and requirements imposed on people who give financial advice do not apply to these recommendations. This includes a duty to comply with a code of conduct and a requirement to be licensed.
All loan applications are subject to the lender completing responsible lending checks and considering the borrower’s individual circumstances. Terms, conditions, fees and charges apply. Information provided is factual information only and is not intended to imply any recommendation about any financial product(s) or constitute tax advice. If you require financial or tax advice you should consult a licensed financial or tax adviser.
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