If we have contracted more credits for the account and their installments suffocate our economy, there is a solution to reduce what we pay each month: reunify all the debts into one to pay a single, more affordable monthly installment. And if the amount we owe is very high, the most advisable thing is to group them with a mortgage, as long as we have a home we own. In this article, we explain how we can do it in three different ways.
Is your home mortgaged? Extend the loan and group your debts
Let’s say, for example, that we already have a current mortgage on our home, in addition to other debts (car loan, credit cards). To unify them all, we can ask the bank to increase the capital of that PHH mortgage. In this way, we will be able to use the money to cancel the other credits and we will only pay the mortgage loan fee.
The main advantage of the extension is that it allows us to pay low interest (that of the mortgage, which rarely exceeds 2%) and return the money over a long term, which can reach 30 years. Now, the bank will have to agree and could ask for something in return, such as raising the interest.
To extend a mortgage, an operation called novation must be carried out.
Do you have a flat fee of charges? You can request a mortgage from the bank
What if we have a house or a flat owned and free of charge? In that case, we can request a mortgage from a bank to reunify our debts. The advantages would be the same as if we extended an existing mortgage, with the added benefit that we will only have to pay the appraisal of the home and a possible opening commission, in addition to the possible cancellation commissions of the other loans.
It must be said, however, that banks do not usually give mortgages for this purpose, especially if we are going through a difficult economic time. And if we find an entity willing to do it, it is possible that it will apply an interest somewhat higher than that of loans for the purchase of homes (probably around 4% or 5%).
Does the bank turn you down? You can reunify your debts with a private lender
As we can see, it is likely that a bank does not want to give us a mortgage on our property free of charges. Even so, we will still have an alternative: contract a home equity loan granted through a private lender or a financial intermediary.
These companies will not be as strict as the banks, so our chances of reuniting the debts will be much higher. The credit, yes, will be more expensive: it will have an interest of around 10% and an opening or brokerage commission of up to 2% or more (we will also have to pay the appraisal of the house and the cancellation expenses of the credits that we liquidate).
One of the most prominent brokers in the market . With your loan, we can obtain up to 40% of the value of our property, with a minimum amount of 10,000 euros and a maximum of 300,000 euros. We will be able to return the money in 20 years and the interest will be between 2% and 14%, while the opening commission may range between 0.25% and 1.5%.
When applying for a mortgage, it is normal for the bank to finance up to 80% of the price of the home you want to acquire. This implies that you will need enough savings to pay the remaining 20%, plus what the purchase and sale costs cost (approximately between 10-12% of the value of the property). However, and although it is not common, there are entities that offer mortgages of more than that 80% in case you do not have enough savings to pay the usual 20% down payment . The online finance Mortgages.com is one of them.