It Pays To Wipe Out Debt
As a Finance Broker with 11 years experience [read that as having helped hundreds of Perth based families get their first home loans] I was a little surprised this week when I had an enquiry for a Low Doc [low documentation loan]. Obviously not simply because it was a Low Doc Loan enquiry, but the conversation that transpired. It was screaming to be my next Home Loan Information Tip post. The conversation started with "We want to borrow about $75,000 to renovate our family home".
With just a few questions I discovered the [pending] new client and his wife had more to consider. They have a home loan of $450,000 and an $18,000 credit card debt. When I asked how they wanted to restructure their existing loans [house and credit card] they said they didn't, they simply wanted to borrow the money for the renovations and had heard about Low Doc Loans. With no disrespect intended, I must say I was rather surprised.
While each persons situation is different, so no one solution fits all, we would still typically suggest it pays to wipe out credit card debt first. With some credit card interest rates over 20% it is far better to pay them out first before making additional home loan repayments. If that is not an option for you, perhaps its time to look at refinancing your home loan. There are many different loan options available and we are only too happy to sit with you, review your needs and plans and then negotiate the best loan with the banks, on your behalf.