WARNING: This new loan may take longer to pay off than your previous loans. This means you may pay more than if you paid over a shorter term
Remortgage
You can do this to access equity in your home in the form of cash, to consolidate debts or for a better rate of interest. If you have had your mortgage for several years it is likely that you have built up equity in your home which you may be able to access, you also might be paying at a higher rate than people who are taking out brand new mortgages as banks often give better rates to new customers than they do to their loyal customers (strange but true!)
Debt Consolidation
Taking all outstanding loans and turning them into one loan at a lower interest rate than homeowners would normally pay for car loans, credit cards or personal loans. This is a more efficient way of meeting those monthly commitments from a cashflow perspective.
Here is a typical example showing how consolidating your loans can reduce your monthly bills. Taking the loan out over 20 years. The obvious issue is that short term debt is being turned into long term debt and in that respect debt consolidation is not a good idea, but if you are struggling to pay bills and this can change your situation to a more manageable one then it is an option if you have equity and are able to raise the additional finance.
| Amount | APR | Monthly Repayment |
|
| Mortgage | € 150,000 | 4.8 % | € 973 |
| Carloan | € 12,000 | 9.5 % | € 280 |
| Personal loan | € 15,000 | 10 % | € 380 |
| Credit Union | € 4,500 | 12 % | € 140 |
| Credit Card | € 2,500 | 21 % | € 75 |
| Total | € 184,000 | €1848 |
New situation
| Mortgage | € 184,000 | 4.8 % | € 1,194* |
| Total monthly saving | € 654 | ||
| Total annual saving | € 7,848 |
Total cost of credit (the interest portion) on the first loan would be €92,101
Total cost of credit in the consolidated loan would be €102,000
Equity Release
Equity is the difference between the value of a property and the mortgage outstanding on the property. As property values fallen significantly in Ireland over the last number of years people may not have any equity and therefore the idea of using it to consolidate debt may not be open to you.
* Loan of €184,000 over 20 years with 4.8% rate & APR.