Rolling credit cards, personal loans and car loans into your home loan can cut your monthly repayments sharply. Set up well, it also clears the way for debt recycling later.
Home › Loans › Debt consolidation
A debt consolidation home loan refinances or tops up your mortgage by enough to pay out your other debts at settlement. The lender pays each creditor directly, and you are left with one loan and one repayment.
Debts commonly consolidated include:
Some lenders limit which debts they will consolidate or how many. Many want the debts up to date and supported by recent statements.
A home loan rate is usually far lower than a credit card or personal loan rate. The catch is the term. A five-year car loan moved into a 25-year mortgage is repaid over 25 years unless you choose otherwise.
| $30,000 of consumer debt | Monthly repayment | Total interest |
|---|---|---|
| Kept at an assumed 15% over 5 years | About $714 | About $12,800 |
| Consolidated at an assumed 6% over 25 years | About $193 | About $28,000 |
| Consolidated at an assumed 6%, repaid over 5 years | About $580 | About $4,800 |
Round, illustrative figures on the stated assumptions only, before fees. They show the trade-off: the lowest monthly repayment can carry the highest total interest. Our debt consolidation calculator runs your own numbers.
Keep paying close to the old repayment on the consolidated amount and you capture the lower rate without stretching the term.
Consolidation only works if the old debts stay gone. If the credit cards are paid off but left open, the limits remain available and the balance can quietly rebuild on top of a bigger home loan.
Closing the cards also helps your borrowing power. Many lenders assess a credit card on its limit, not its balance, as if you could draw it all. A $20,000 limit with a nil balance can still reduce what you can borrow.
Keep one low-limit card if you need it for travel or bookings, and close or reduce the rest at settlement.
The rate saving has to outweigh the cost of getting there. Before you commit, compare:
On a small amount of debt that would be cleared within a year or two anyway, these costs can wipe out the saving. On larger balances at high rates, the numbers usually favour consolidation, provided the term is managed.
You need enough usable equity to absorb the debts plus costs. Many lenders cap a consolidation refinance at 80% of the home's value without lenders mortgage insurance, and some set lower limits for cash out and consolidation. Our LVR calculator gives a first estimate.
Replacing several short-term repayments with one smaller home loan repayment often improves servicing on paper. Lenders still check your full income and expenses, your credit file and the account conduct on the debts being paid out. Missed payments or a recent default narrow the lender choice.
Expect to provide recent statements for every debt being paid out, along with payslips or tax returns and your current home loan statements. Lenders use those statements to confirm balances, limits and repayment history, so gather them before the application starts.
Consolidated consumer debt is non-deductible. Once it joins your home loan, it adds to the very balance a debt recycling strategy is trying to shrink. The ATO links interest deductibility to what the borrowed money is used for, and paying off a car or a credit card is private use.
That makes the order clear:
Put the consumer debt in a separate split so you can see it and target it.
Direct extra repayments at that split until it is gone, or at least well down.
Add a separate investment split once the consumer debt is cleared and you hold a cash buffer.
Some clients run both side by side, clearing the consolidated split while recycling small amounts. Either way, deductible and non-deductible borrowing never share a split. Our guide to clearing consumer debt before debt recycling covers the order in detail.
Our loan structure page shows how the splits are built.
Securing short-term debt against your home means the home is at risk if repayments stop, so the plan to repay matters as much as the rate.
Tell us where you are and what you want to do next. We will tell you what the lending side looks like, including whether debt recycling fits later.
Request a Call With Alex →Our loan application document checklist lists the statements and documents to gather.
It can be when you have several high-rate debts, enough equity and a plan to repay the consolidated amount quickly. The lower rate cuts repayments, but stretching short-term debt over a 25 or 30-year term can increase the total interest paid. It works best when spending habits have already changed and old card limits are closed.
Often it improves it, because one lower home loan repayment replaces several higher ones, and closed credit cards stop counting against you. The larger loan balance and your overall income and expenses still matter. Lenders also review your credit file and how the debts being paid out have been managed.
Not always, but it often helps. Many lenders assess a card on its full limit even with a nil balance, which reduces borrowing capacity. Leaving paid-off cards open also makes it easy for the debt to return on top of a larger home loan. Some lenders make closing the consolidated cards a condition of approval.
Enough to absorb the debts and costs while staying within the lender's limit, often 80% of the home's value without lenders mortgage insurance. Some lenders set lower limits for consolidation or cash out. A valuation confirms the figure, and we check it across lenders before you apply.
Generally not when the debts were for private purposes such as a car, holidays or household spending. Deductibility follows how the borrowed money was used, not the fact that it is now part of a home loan. Keeping it in its own split keeps your records clear. Your registered tax agent confirms the treatment.
Why the order matters, and how to sequence it.
Read more → CALCULATORCompare repayments and total interest before and after.
Read more → SERVICEThe splits that keep deductible and private debt apart.
Read more →
1. Arranged a loan when our small business situation made it difficult to qualify.
2. Met requirements to have funding available by a specified date.
3. Understood my needs to setup debt recycling to allow tax structuring.
4. Communicated well throughout.
I would use their services again.
Alex, Jess and the Kingfisher team were second to none and their process from start to finish was faultless. As a self-employed business owner, it can be difficult to obtain finance at the best of times. The Kingfisher team made this an easy and efficient proposition and their continued transparent and efficient communication ensured we were kept up to date at all times. Highly recommend them for your finance needs!
Alex and Jess dealt with our investment loan and provided a top tier service. They kept us up to date and communicated every step of the process making it a seamless and smooth experience! Awesome work team we will definitely be back for future loans!
Jess from Kingfisher was outstanding. I couldn't fault her communication, expertise or dedication to finding the best loan for our situation. The entire process was seamless from start to finish. We'll definitely be using Kingfisher again in the future. A top-tier organisation.
Next Step
Talk it through with Alex
Bring a rough picture of your home loan, income and savings. You will come away knowing whether the lending side looks workable.
Free, no-obligation call · We call back within 1 business day
Prefer to talk now? Call 0438 376 200
