Merging & consolidating loans: merging a mortgage and other loan types are possible!
Fortunately, there are a number of credit institutions that offer this service and Mortgage Brokers works as an independent broker with all these companies. Because the major banks do not offer this solution and sometimes even say that it is not possible at all, there is no clear word or expression for it. One society calls it ‘debt centralization’, the other ‘the consolidating of loans’ and another simply says ‘the merging of loans’. Anyway, if you have multiple loans with a mortgage then you can all combine these loans into one mortgage loan. See dokterherbalindonesia.com for the scoop
What does that mean for you?
By merging a mortgage, for example with an installment loan, credit card, credit opening or car financing, one loan will remain. A positive consequence of merging, consolidating or centralizing your loans is in most cases a lower monthly payment. Moreover, you have a better overview of your finances because only one loan continues to run.
Another additional benefit to possibly lower your monthly costs arises because the term of a mortgage is usually longer than the term of an installment loan. Because the longer the term of the loan, the lower the monthly charges.
Conversely, it may also be the case that you want to shorten the term. This can also be achieved if you centralize, combine or regroup your loans. Then the lower interest rate ensures that you can pay off faster.
What are the conditions?
To regroup your mortgage with one or more loans, it is important that the value of the home is higher than the sum of the debts. If you have been paying off your mortgage for a number of years, it makes sense that your debt will be slightly lower each month. The value of the home may have increased in the meantime due to market developments or because you have done work.
A new mortgage where the mortgage and the loans are merged or centralized, may never exceed the value of the home. The higher the value of the home compared to the new (combined) mortgage, the lower the interest rate that you will pay for this new mortgage.
Moreover, centralization is only possible if there is sufficient income.
When we finance up to 80% of the value of the home, any income may be included; such as children’s money, meal vouchers and even a temporary income. The only exception to this is an interim income of less than two years. The bank sees this as too great a risk.
If you have a fixed income for an indefinite period, this means more certainty for the bank than if you have a temporary income and this in turn has an effect on the interest rate. So with a fixed income the bank will often offer a lower interest rate for merging or consolidating loans than with a temporary income.
Michael and Sarah are a couple with two stable fixed incomes, both earn € 2,000 net per month. They bought a house a few years ago; a semi-open building, the home value of which is now € 300,000.
They still have a mortgage of € 160,000 (originally € 200,000 with an interest rate of 3.6% and a term of 25 years). For this they pay € 1,005.75 monthly
With the purchase all own money was put into the home and due to all kinds of circumstances a number of loans with a total amount of € 40,000 are now running. The total costs for these loans are € 654.23 per month. (interest 9.95% term 7 years)
An annual debt balance insurance of € 200 per person is also paid. That brings the current monthly burden to a total of € 1,675.89.
If we would merge this, we can do so at a low interest rate of even 1.6% (dated prospectus N ° .91 01/04/2017). Including notary fees, reinvestment compensation, a small cash reserve and a debt balance insurance, the new mortgage that is taken out when the loans are centralized amounts to € 210,000. The proposal that Mortgage Brokers makes for the consolidating of all loans where all loans are merged including all additional costs, then looks like this:
- Loan sum: € 210,000
- Duration: 25 years
- Interest: 1.6% (à 3/3/3 *)
- New monthly payment : € 848.62 per month
After consultation with Mortgage Brokers, the choice is made for a term of 22 years:
€ 210,000 à duration 22 years à 1,6% à 3/3/3 * at € 943.04 per month
At 22 years of age, this is still a lower charge of € 800 per month, and an example that is really no exception.
Suppose that … the incomes had now been € 2,000 in total . Mrs has an invalidity allowance and is entitled to child allowance. Mr. has a contract for one year and earns € 1,200 a month. There is no attachable income in this case, so an interest rate of 1.6% is not possible here. The proposal made to them in this case is:
- Loan sum: € 210,000
- Duration: 25 years
- Interest: 2.75% (à 5/5/5 *)
- New monthly charge € 965.09 per month
A new one-off basic tax certificate will be issued for the part of the original mortgage, so that the tax benefit will continue to exist.