Debbie Shankar - 20 Nov, 2013

Can I Combine My Existing Finance with My Home Loan?

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Combining your home loan with your car loan, credit card and any other existing finance is possible. Plus, it allows you to take advantage of lower interest rates, as home loans are the cheapest form of finance on the market. Combining your debts, is called debt consolidation and it can reduce your existing finance payments considerably giving you more income to live off each month.

However, it is important to remember that a home loan is a long-term commitment that has a 25 to 30-year term. Whereas, a car loan and your store accounts, and credit cards are short-term commitments that are typically 5-years or less. So while home loan interest rates are considerably less than car loans and credit cards, it is vital that you pay more off your home loan if you combine your finance, so that you don’t end-up paying thousands in interest over the term of your loan.

Let’s look at the advantages and disadvantages of combining your existing finance.

The Advantages of Combining Your Existing Finance with Your Home Loan

  • One loan repayment per month, rather than many;
  • Greater flexibility;
  • Increased monthly cash flow;
  • Able to buy what you need now, rather than later; and
  • Decreased financial risk, as you are not trying to juggle many financial commitments.

The Disadvantages of Combining Your Existing Finance with Your Home Loan

  • If you don’t make extra home loan repayments, it could  be costly in the long-run; and
  • Refinancing or using your redraw facility to payout your other financial commitments may incur extra fees.

To overcome any disadvantages, make extra home loan repayments when you can afford to or pay more on a regular basis. This will reduce your principal and the overall interest that you pay over the term of your home loan. Also make sure you ask about any associated fees, especially if you wish to use a redraw facility or to refinance your existing home loan. Then work out your costs to see which option is better for you and your financial circumstances.

How Can I Combine My Existing Finance with My Home Loan?

There are two ways that you can combine your existing finance with your home loan. These are as follows:

  • Use your redraw facility –  If you have a redraw facility and you have money in this facility, then you can simply work out what you need to cover your existing finance and then draw this money out. Of course, we recommend that you work out how much extra this will cost you and then pay this extra amount off per month. This way you’ll reduce your debt faster and save yourself a great deal in interest long-term.
  • Refinance your home loan – If you don’t have a redraw facility, then you will need to consider refinancing your home loan to cover your existing finance and your home loan. Just be mindful that some lender’s will charge you a home loan exit fee when you change your home loan and that you may incur home loan application costs when you apply for a new home loan.

Do you want to know more about combining your existing finance with your home loan? If you answered yes, then contact eChoice and find the right home loan for YOU today.

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