This is an email question, which today will be anonymous for personal reasons. The questions asked, I have $65,000 worth of credit card debt, I having problems keeping up with the repayments, and cant seem to pay them down, can I consolidate this credit card debt into my home loan?
Getting into a bit of debt with credit cards these days is quite common. They can be really hard to pay off, as some interest rates on them can be more than 20%, depending on the credit card conditions. In a short answer to the question, Can credit card debt be consolidated into an existing home loan, the short answer is yes, if you have enough equity in your home.
Lets look at what I mean by equity. All banks or lenders lend money against the property value. Most banks and lenders will lend up to 95% of the property value. For example, of you have a property worth $400,000, most banks and lenders may lend up to 95% of this value. 95% of $400,000 is $380,000, so you may be able to borrow up to this amount. When you borrow more than 80% of the property value though, the home-loan will be subject to lenders mortgage insurance, which may be quite expensive if you choose to do this.
In the email question today, this customer has a property worth $395,000, and his current home loan limit was $235,000. He wanted to consolidate the credit card debt into his home loan, which was $65,000. The home loan would increase by $65,000, taking the new limit to $300,000. The customer had income to support the increase in his home loan to $300,000. The other good thing was that with the increase in the home loan to $300,000 and a current property value of $395,000, the loan wasn’t subject to lenders mortgage insurance, as the loan to property value (LVR) was less than 80%.
The paperwork we needed to apply for the home loan increase was 6 months of each credit cards statement, to see that the conduct with the credit card payments was satisfactory. If you are having problems with credit cards or other loans, there are some lenders that may not require these statements.
In this customers case the increase to his mortgage was approved, and we paid out all of those credit cards. The customer also closed all but one of those credit cards to ensure that he wouldn’t max those limits again. In this example, the customers monthly mortgage repayments went up from approx $1,578 a month, to $2,017 a month. The approx credit card repayments were approx $1,800 a month, so the customers monthly commitments were reduced significantly.
The customer is also committing to pay more off per month than the minimum repayment too, as the home loan term is 30 years, and if he was to pay the minimum repayments, the credit card debt consolidated may cost him more in the long term.
If you are thinking about consolidating your credit card or other personal debts into your mortgage, and would like some obligation free information, please contact me anytime, and I can give you your options, and the costs involved to consolidate your debts into your home loan.
If you have any comments, please leave below, or would like to use my services as a mortgage broker, please contact me anytime.
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