Home owners suffering from a festive season financial hangover can ease the pain by considering consolidation of their debts, says a leading mortgage broker.

Loan Market Group’s National Manager for Operations and Risk, Ivan Karamatic, said refinancing was a popular option for mortgage holders to offset increased credit card expenses and other debts.

“We often get an increase in people seeking to refinance at this time of year because they have had a more expensive Christmas and New Year than they anticipated,” Mr Karamatic said.

“Debt consolidation combines several loans into a single loan, assisting you to manage repayments, reduce interest rate costs and control your debt.

“Typically, debt consolidation combines unsecured debts such as personal and car loans, credit card balances and store card balances into your home loan, securing the debt with your property.”

Mr Karamatic said home owners were often hesitant to refinance because they believed it would be too much trouble due to the fees and paperwork involved.

But he said there were numerous benefits, particularly taking the opportunity to reduce debt on credit cards, which have interest rates often more than triple that of an average variable home loan.

“Among the other benefits is the chance to reduce your monthly interest rate outgoings and get back in control of your debts,” Mr Karamatic said.

“For example, a $10,000 credit card debt at an interest rate of 18 per cent per annum with repayments of $300 per month would take four years to repay with a total interest bill of more than $4,000. By consolidating the same debt into your home loan and maintaining the extra $300 per month repayment if possible, the same debt would be repaid in just over three years with an interest saving of more than $3,000.

“A mortgage broker is best placed to determine whether refinancing will work for you.”

Mr Karamatic said while refinancing a home loan offered short term relief for home owners struggling with debt, it still meant they would take longer to repay their mortgage.

“There are also fees and charges associated with increasing your home loan and these are typically around the $300 to $400 mark,” he said.

“For refinance to another lender, the fees and charges will be higher due to some additional government fees and possible exit fees from the outgoing lender.

“Be mindful that debt consolidation should not be seen as a complete fix and it’s important to look at the underlying reason you have excess debt in the first place.”

Mr Karamatic said those refinancing should endeavour to increase their home loan repayments above the minimum amount required.

“This will help you to reduce the interest charges over the life of the loan,” he said.