Consolidating loans into the mortgage: what to weigh
Several loans with different repayments can become one repayment. When that eases things, when it costs more, and what to check before you consolidate.
By Lidor Levin3 min readTracks and refinancing
If you are paying several loans at once, say a car loan, personal loans and an overdraft, you know the feeling: many repayments, different dates, and no clear view of the whole picture. Consolidating them into the mortgage replaces them with a single loan secured on the property. Sometimes that eases the monthly cash flow a great deal; sometimes it makes the cost higher over time.
What consolidation does
The existing loans are paid off and replaced by a loan secured on the property, usually over a longer term. The monthly repayment can drop and become simpler to manage, but it is worth understanding what sits behind it.
The other side of a lower repayment
Spreading a short debt over many years makes the monthly repayment smaller, but the total you pay can grow. The debt also becomes tied to the property. So the question is not only how much lower the monthly repayment will be, but how much you will pay in total and what it means for your flexibility later.
For illustration
Say a loan of ₪60,000 has three years left. Folded into a mortgage over twenty years, the monthly repayment on that part would be much lower, but interest would run over a much longer period, and the total could end up higher. The figures are for illustration only.
What to check before consolidating
- Every loan: the balance, rate, repayment and end date of each one.
- Early repayment fees on the existing loans, and on the mortgage if it changes.
- The total cost before and after, not only the monthly repayment.
- Habits: if the overdraft fills up again after consolidating, you are back at the start with a bigger debt.
- The mortgage itself: sometimes it is right to check consolidation together with a refinance.
When it can make sense
Consolidation can make sense when monthly cash flow is tight, when the existing loans are expensive, or when several repayments are hard to manage. It makes less sense when the repayment drops only slightly and the total cost grows a lot, or when the cause of the debts has not been dealt with. Only a check of your own numbers will show which side you are closer to.
Check what happens after consolidation
- Prepare a household budget that supports the new repayment without rebuilding the other debts.
- Ask to see the existing balance, additional borrowing, costs and new end date separately.
- Compare a partial consolidation too: a loan close to its end may not be a good candidate for a much longer term.
Common questions
Can I consolidate only some of the loans?
Yes, you can choose which loans to fold in and which to keep. Sometimes it is worth consolidating the expensive ones and leaving loans that are about to end.
Does consolidation affect the existing mortgage?
Yes. It increases the debt tied to the property, and sometimes involves changing the mortgage itself. So the two are checked together, including fees and terms.
General information only, not personal advice. Every figure here is for illustration.
Further reading
Want to look at this for your own case?
On the intro call we'll go through all your loans and work out together whether consolidation is worth a closer look, and if so, in what shape.
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