There are pro's and con's for borrowing against your home and they all need to be taken into consideration before you go with any additional borrowing.
On the one hand the money you can borrow on your home will be of a lower interest rate than most other forms of loans and this can help you to reduce your monthly repayments by using the house money for clearing more expensive debt. With the ability to spread the term of repayment over a much longer period you can generally make quite an impact on reducing your monthly outgoings.
Use your budget to determine how much you are paying on all your outstanding debt and then calculate what the payments would be if they were all consolidated under the one loan against your house. This will show whether that is the best decision to make to help you manage your finances more easily.
Where house prices are rising, you will have increasing equity in the home that will allow you to borrow more against it since the time you originally arranged your mortgage.
The bad side of this is that borrowing against your home is where you are already struggling to make your housing mortgage payments and by borrowing more you will be putting your house on the line and you risk losing it. the last thing you want is the banks to foreclose on your loan and if that looks like what might happen then it would be better not to increase your borrowings.
If you add up that you will not be able to make the extra mortgage payments then it is better to sell off other items that you have borrowed against to get rid of debt elsewhere rather than risk losing your home.
It might also be necessary to consider downsizing on your home and buying something of a lower value so you can reduce your mortgage accordingly until you get your feet back on the ground.
Your home is your most valuable asset and you should always do all you possibly can to retain ownership of it.
by Peter Jowett
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