Credit cards at 20%, personal loans at 12%, car finance at 9% — all rolled into your mortgage at under 7%. Debt consolidation via home loan can transform your monthly cash flow.
- Rolling high-interest debt into a home loan lowers your rate dramatically — but spreads repayments over a longer term.
- The total interest paid can actually increase if you don't maintain higher repayments after consolidating.
- Lenders assess serviceability on the total consolidated loan — you need sufficient equity and income.
- A broker structures the consolidation correctly to avoid traps and identify the right lender.
If you're carrying credit card debt at 18-22%, personal loan debt at 10-14%, and a car loan at 7-9%, the combined monthly repayments can feel overwhelming. Debt consolidation via your home loan — rolling all of these into a single mortgage — can dramatically reduce your monthly outgoings.
How Debt Consolidation Via Home Loan Works
You refinance your existing home loan with a new lender (or top up with your current lender). The new loan is large enough to pay out your existing mortgage plus your other debts. Your credit cards, personal loans, and car finance are paid out at settlement. You make a single repayment on the consolidated home loan at home loan interest rates.
The rate reduction is dramatic: a $20,000 credit card balance at 19.99% costs $333/month in interest alone. The same balance at 6.5% on a home loan costs $108/month.
The Real Maths: Total Interest Paid
Here's the risk many people overlook. Home loan terms are 25-30 years. Personal loans are typically 3-5 years.
When you roll a $20,000 personal loan into a 30-year mortgage at 6.5%, you pay far more total interest than if you'd paid the personal loan off at 12% over 3 years:
- Personal loan 3 years at 12%: approximately $3,800 total interest
- Same debt in mortgage 30 years at 6.5%: approximately $25,600 total interest
The solution: maintain the same repayments on the consolidated portion as you were paying on the original debts. The lower rate gives you breathing room — use it to pay the debt faster, not to spend more.
What You Need to Qualify
Equity: most lenders will go to 80% LVR for debt consolidation refinancing. Income and serviceability: the lender assesses your ability to service the new, larger loan. Credit history: if your debts are accompanied by credit default listings, see our bad credit home loan guide for the parallel path available.
What Debts Can Be Consolidated?
Most types of debt can be consolidated: credit cards, personal loans, car loans, store cards and buy-now-pay-later balances, and ATO tax debts in some cases with specialist lenders. You cannot consolidate HECS/HELP debts or child support arrears.
Debt Consolidation Using a Personal Loan (Without a Mortgage)
If you don't own property, personal loan debt consolidation can still simplify your repayments and reduce your rate — replacing multiple debts with a single lower-rate personal loan.
Choosing a Debt Consolidation Mortgage Broker
Lenders assess consolidated loan applications differently — some are more flexible on LVR, others on debt type. A specialist debt consolidation broker knows which lenders will give the best outcome for your specific debt mix and equity position. Moneysmart's debt consolidation guidance covers the key considerations.
Contact Sam for a free debt consolidation assessment — we'll calculate exactly how much you could save and which lender offers the right terms for your situation.
Frequently Asked Questions
Should I close my credit cards after consolidating?
Yes, in most cases. Leaving cards open with zero balance can be a temptation to re-accumulate debt. Closing them also improves your credit profile by reducing available credit.
Can I consolidate ATO tax debt into my home loan?
In some cases, yes. Specialist lenders consider ATO debt consolidation, typically with supporting documentation showing the debt has been agreed with the ATO. Standard lenders are more restrictive.
