Consolidation of debt is not necessarily ideal: Smartline

Alistair WalshDecember 7, 2020

Consolidating multiple debts into a mortgage is not necessarily the ideal way to manage your finances, according to mortgage broker firm Smartline.

“It’s very uncommon for someone with a home loan to get into financial trouble,” Smartline Director Joe Sirianni says. “Unless they get sick and can’t work or they lose their job, it’s unusual for that to happen.

“It’s when people have a home loan, two credit cards, an interest free loan and a car loan – that’s when they start getting into real financial trouble as having to service all these debts proves increasingly expensive and stressful.”

Consolidating that debt into your mortgage is an option only if there’s enough equity in the property, says Smartline adviser Shawn French.

 “It’s not something you can keep on doing – your house isn’t a limitless ATM, particularly in light of the flat property prices experienced in recent years,” French says.

 “This isn’t a problem faced just by people on certain levels of income. It’s a problem for anyone who consistently spends more money than they earn and it’s something that most mortgage brokers regularly see.”

They advise people to set goals and priorities to avoid the temptations of spending too much money; to have a budget; to work out the true cost of things like making your own lunch; to save for things rather than pay on credit card; to pay for things with cash and to structure your finances.

Someone with a $350,000 mortgage at 5.25% for 30 years could shave more than seven years off their loan by buying a $15 lunch and coffee just once a week instead of five and diverting the savings to their mortgage.

Alistair Walsh

Deutsche Welle online reporter

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