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A package mortgage is a mortgage that don’t just finance the purchase of a property, but also finance the purchase of personal property as well.
Meaning that together with the loan to buy the house, there is excess that enables the borrower to purchase other things like furniture and household appliances.
This can sometimes appear very attractive to home buyers who don’t have savings but with strong cash flow.
Compare this with interest rates on credit card that can exceed 20%, and that 6% on a home loan looks too much of a bargain to turn down.
In additional to that, interest payment for these home appliance products are tax deductible as well.
However there are drawbacks as well.
With a package mortgage, it means that the loan for the purchase of personal property will have the same term as the home loan, which might be over 30 years.
This can result in a huge accumulated interest costs over the life of the loan.
But of course, a smart homeowner can always redeem part of the loan somewhere in the near future to offset that interest costs… provided there are no redemption penalties that will be incurred.