Debt consolidation home loans
Consolidating means rolling your other debts, like credit cards, personal loans and car loans, into your home loan, so you have one repayment at a home loan rate. The monthly payment usually falls a long way. The catch is time: spread a five-year debt over a 30-year mortgage and you can pay far more interest in total, and your home now secures debts that weren't secured by it before. It works when you keep repaying the old debts quickly.
What the government's MoneySmart says first
MoneySmart, the government's money guidance site, puts the risk plainly: consolidating "may cost you more if the interest rate or fees (or both) are higher than before", and "if you can't pay off the new loan, the home or car that you put up as security may be at risk." Rolling unsecured debts into your home loan means a missed card payment used to be a card problem. Now it's a home loan problem.
It also warns against consolidation firms that aren't licensed, ask you to sign blank documents, or won't put the costs and rate in writing before you sign.
The monthly saving, and the number underneath it
An illustration, not a client file. You owe $15,000 on a credit card at 20%, $20,000 on a personal loan at 12% with four years left, and $25,000 on a car loan at 9% with five years left. Your home loan rate is 6.0%.
| How you repay the $60,000 | Monthly repayment | Total interest |
|---|---|---|
| As now: card over 3 years, the loans to term | $1,603 | $16,486 |
| Rolled into the home loan over 30 years | $360 | $69,503 |
| Rolled into the home loan, repaid over 5 years | $1,160 | $9,598 |
Spread over 30 years, the payment drops by $1,243 a month, but the total interest is over four times what you'd pay now, about $53,000 more. Repaid over five years, it saves about $443 a month and about $6,900 of interest.
How to consolidate without the lifetime cost
The answer is to consolidate the rate, not the term. Put the debts into a separate split of your home loan, and repay that split over the time the old debts had left, or faster. In the example, carrying on paying the old $1,603 a month into the new split clears the $60,000 in about three and a half years, with about $6,600 of interest.
What undoes it is the spare cash. If the monthly saving gets spent, and the cards fill up again, you end up with the old debts back on top of a bigger home loan.
Which debts are worth rolling in, and which aren't
Usually worth it: credit cards and store cards at high rates, personal loans well above your home loan rate, and car loans with years left to run, if you'll keep repaying them quickly.
Usually not: a debt that's nearly paid off; one at 0% or close to it; a loan with a break cost bigger than the saving; your HELP study debt, which charges indexation rather than interest and is repaid through your tax; and business debts, which are a separate conversation.
What consolidating costs you
Break or early payout fees on the personal or car loan you're paying off.
Refinance costs, if you're moving your home loan to do it: a discharge fee, government title fees, and any new lender fees.
Lenders mortgage insurance, if adding the debts takes you over 80% of your home's value.
The interest over the full term, if you don't repay it faster, which is usually the biggest cost of all.
What a lender looks for when you consolidate
A lender wants to see that the debts you're consolidating have been paid on time, and that you can afford the bigger home loan. Firstmac's published policy, for example, accepts personal debt consolidation where those debts have been well conducted. It also relies on your Equifax credit report, rather than months of statements from each lender, where every borrower has a satisfactory score and no defaults. That can take weeks off the paperwork.
If you'd also take cash out, lenders want to know what for. Firstmac asks for clear detail of the purpose, and evidence such as quotes or a contract above $100,000; "personal use" on its own isn't accepted.
What it does to your credit file
Applying for the new loan adds an enquiry to your credit file. Paying the old debts out closes them, which shows as accounts paid. Close the cards you've paid off rather than keeping the limits open: a lender assesses you on your card limits, not just what you owe on them, and empty cards are the easiest way to end up with the debt twice.
If you're already behind on repayments
If you're behind on your repayments now, a new loan usually isn't the answer, and most lenders won't approve one. Talk to your lender about hardship first: lenders have teams for this. The National Debt Helpline offers free financial counselling on 1800 007 007.
The alternatives that aren't a home loan
Ask your current lenders for a lower rate on the card or personal loan.
A 0% balance transfer card, if you'll clear the balance before the offer ends, and close the old card.
A hardship arrangement with your lender, if you're struggling to pay.
Free financial counselling through the National Debt Helpline, 1800 007 007.
If one of these fixes it, you don't need a broker, and I'll say so.
Questions about consolidating debt into your home loan
It can be, if you repay the consolidated amount over a short time. Over a 30-year term you can pay several times more interest than you'd pay on the debts now, and your home secures them.
Thinking of rolling your debts into your home loan?
Send me a list of what you owe, the rates and the repayments, and your home loan's balance and rate. I'll show you the monthly saving and the total cost side by side, and tell you which debts to move, which to leave, and whether it's worth doing at all.
You'll hear back within the hour in business hours, and by 9am the next business day after hours.
Sources
- 1
MoneySmart (ASIC), Consolidating and refinancing debts (updated 31 August 2026). Read 2 October 2026.
https://
www.moneysmart.gov.au/ managing-your-money/ managing-debts/ consolidating-and-refinancing-debts - 2
Firstmac, Residential Lending Policy, sections 18.5 and 18.6 (changelog to 28 July 2026). Read 27 August 2026.
- 3
The worked example: Money Brain's arithmetic on the stated debts, rates and terms.
Updated 3 October 2026