Can I Consolidate Debt into a Home Loan?

Australians are under more financial stress than ever before, with the cost of living continually increasing. Many people take out multiple credit cards and loans in an attempt to stay on top of their expenses, however this creates a financial burden and can make it harder to manage financial commitments.

Consolidating your credit cards, car loan or personal loan into a home loan can ease this financial strain, as the interest rate on a mortgage is usually much lower than on credit cards or personal loans. This allows you to save a substantial amount in interest and focus on making only one regular repayment, rather than many.

Most lenders will lend, or increase your loan to 80% of the value of the property without mortgage insurance, or up to 90% if you have mortgage insurance. This means that the current value of your property – or the property you are considering purchasing – is key to whether this form of debt consolidation is possible.

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Benefits of consolidating debt into a home loan

Making timely repayments on your debts is vital to maintaining a good credit file and credit score. However, it’s easy to miss repayments when you have a combination of debts in the form of multiple credit cards, a car loan or personal loan, plus a home loan. Consolidating your debt into the one repayment to your home loan, is an effective way to simplify your expenses.

Home loans usually carry a much lower interest rate than credit cards and personal loans. Consolidating your debt into a home loan provides access to the low interest rate of the mortgage, for the other debt too.

However, it’s important to understand that a lower interest rate isn’t the only consideration. While a personal loan may have a five year term, home loans are usually structured over a longer term, for example 30 years. This means that you may inadvertently end up paying more interest on your debt, due to the extended repayment term. This is why it’s important to research home loans and choose a mortgage that will save you money when consolidating debt.

Things to consider when consolidating into a home loan

It’s important to choose the right home loan so that if you do choose to consolidate your debt into a mortgage, you don’t end up worse off financially. Here are some key considerations when researching home loans

  • Competitive interest rates
  • Offset accounts: This allows you to keep your mortgage ‘separate’ to your other debt within the loan, to avoid paying additional interest on the debt brought in under the home loan.
  • Ability to pay extra on top of regular repayments
  • Free redraw

Once the loan settles, your focus should be on fast tracking repayments to pay the extra debt off. It’s also important to not fall into the same trap again. Cancel credit cards and interest free facilities to avoid the risk of building up more debt.

Ready to consolidate your debt?

Once you’ve decided that you want to consolidate your debt into a home loan, it’s best to seek financial advice on whether this is the best option for your circumstances.


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