It is possible in many cases to get a debt consolidation loan using your home as collateral. This makes a lot of sense for many reasons: it reduces your monthly payments, the interest on a mortgage is much lower than the interest on corresponding loans and the amount of time over which your loan amortizes can be much longer.
However, mortgages are not simple, not without cost, and not quick. We also have to be more cautious than usual with the banks, as your being between a rock and a hard place is a prime opportunity for the bank to profit. Bank A is more than happy to relieve your debt from Bank B, but they see no point in offering you even their second best rates. We need to tell your story properly and bring it to the right branch of the right bank (this will differ from borrower to borrower). We still won't get you a deal like a purchase loan, but it will be under much better conditions than consumer debt.
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| Why are they still offering more debt? |
It's amazing that we still hear the commercials on the radio encouraging us to take "just take 40K" as if it were a gift. The rates being charged are amazing, prime + 4.5, 12%, or even worse. If you have anything on "credit" from the wonderful credit card companies, you are likely paying even higher. Expect similar rates on your overdraft.
The most important part about a debt consolidation loan is that you need to get it well before you need it. The banks don't really care about your property too much. So long as you are within their lending guidelines, they'll make the loan.
What they really care about is the financial competency of the borrower. Can you make the payments? Do you have a history of missing payments? Is your credit history clean? Is this loan a one-time reset of your financial situation which will put your house in order?
It's OK if you have some overdraft. It's OK if you have some debt. However if you have been missing payments on debt, it will be difficult to refinance you into a bigger loan. If there is a good chance that you will need a loan, the time to refinance is as early as possible.
Real Israeli Mortgage Rule #5: It's OK to get a debt consolidation loan, but you have to get it before you need it.
Every case is different, and you should always consult your qualified Israeli Mortgage Advisor.





