YOUR HOME LOAN IS NOT AN ATM
In this example, if you took the R250 000 from your mortgage, your minimum monthly repayment would increase by R2 500. You may think that this is a big saving because your monthly car payment falls from R6 000 a month to R2 500 – and this is the mistake people make. They look at the monthly affordability rather than the fact that, over 20 years, that R250 000 will cost a huge R600 000.
The same applies to any short-term debt, such as credit cards or personal loans. If you settle your R20 000 credit card debt by drawing money from your home loan and not increasing your repayment, that R20 000 will end up costing R48 000.
Also remember that if you continuously use your mortgage as an ATM machine, you may still owe money on your home by the time you retire.
Considering that most people will experience a drop in income of between 25% and 75%, you may struggle to continue to meet those mortgage payments and possibly lose your home in retirement.
Your mortgage may look like an attractive way to consolidate your debt, but it won’t be if it’s not used responsibly.