What does consolidating debts into your mortgage actually mean?

It means refinancing your home loan for a larger amount and using the extra funds to pay out other debts — a credit card, a car loan, a personal loan or a buy-now-pay-later balance — so you're left with a single monthly repayment at your mortgage's interest rate. In practice we're rolling several higher-rate debts into one lower-rate loan secured by your property.

The appeal is simple arithmetic. Consumer debt is expensive. Moneysmart, the government's financial guidance service, describes debt consolidation as rolling multiple debts into one to make them easier to manage and, ideally, cheaper. If you can move a balance from a 21% card to a 6% home loan, the interest clock slows dramatically.

What consolidating $65k of debt does to the monthly bill
$0 $1,000 $2,000 $3,000 $4,000 Home loan $500k — $3,043/month Car loan $40k — $821/month Personal loan $15k — $345/month Credit card $10k — $250/month $4,459 PER MONTH Home loan $500k — $3,043/month Car loan $40k — $243/month Personal loan $15k — $91/month Credit card $10k — $61/month $3,438 PER MONTH Now — four separate debts One $565k home loan $500k + $40k + $10k + $15k all four rolled together
  • Home loan $500k — $3,043 → $3,043
  • Car loan $40k — $821 → $243
  • Personal loan $15k — $345 → $91
  • Credit card $10k — $250 → $61
Assumes the home loan at 6.14% over 30 years, the car loan at 8.5% over 5 years, the personal loan at 13.5% over 5 years, and the card at its 2.5% minimum repayment. Notice the home loan bar doesn't move — it's the same $500,000 at the same rate either way. The whole $1,020 saving comes from the other three debts, and it comes from stretching them: that car loan had 5 years left to run and now has 30. Paying the new minimum is what turns a $1,020 monthly saving into more interest overall.

Will it really save me money?

On the monthly repayment, almost always yes. On total interest paid, often no — and that's the distinction that trips people up. According to the RBA's Indicator Lending Rates, the standard credit card interest rate averaged 20.99% p.a. in May 2026, while owner-occupier home loans sat around 6%. Shifting a $15,000 card balance to your mortgage rate is a big rate cut.

The catch is the term. A credit card or personal loan might be cleared in three to five years; your mortgage might have 25 to 30 years left to run. Moneysmart makes the point plainly: a lower interest rate spread over a longer period can mean you pay more interest overall. A $15,000 debt at 6% over 30 years quietly costs more in total interest than the same debt at 21% over four years, simply because it's charged for so much longer.

The way to capture the saving without the sting is to keep your total repayment at (or above) what you were paying before consolidating, so the rolled-in debt is repaid quickly rather than drip-fed across decades.

Our debt consolidation calculator, showing $45,000 of debt at 18.9% rolled into a home loan: cleared in 3 years 6 months if repayments stay the same, versus 4 years 10 months on the current path, and a warning that paying only the new minimum costs $18,316 more interest.
Run your own numbers in our debt consolidation calculator — it shows all three paths side by side, and the slider works backwards from a deadline: tell it when you want the debt gone and it works out the extra repayment per week, fortnight or month.

What's the risk of putting debt against my home?

This is the part we won't gloss over. When you consolidate, you turn unsecured debt (a credit card the bank can't take your house over) into secured debt tied to your property. Moneysmart warns that turning debts such as credit cards or personal loans into a single debt secured against your home or car puts that asset at risk if you can't repay. A missed credit card payment is a serious problem; a missed mortgage payment can ultimately put your home on the line.

When does consolidating into your mortgage make sense?

It tends to stack up when the numbers and your habits line up. The situations where we most often see a genuine win:

The trap we see most often is the "reset and repeat": someone consolidates $20,000 of card debt into their mortgage, feels the relief, then runs the cards back up over the next two years and ends up with both the mortgage and new card debt. Consolidation only works if the old accounts are closed or strictly controlled.

What does it cost to do, and are there alternatives?

Refinancing to consolidate isn't free. Budget for a discharge fee on your existing loan, application or settlement costs on the new one, potential LMI if you cross 80%, and break costs if you're exiting a fixed rate early. We weigh those one-off costs against the ongoing interest saving to confirm there's a real net benefit before recommending anything.

It's also worth knowing the alternatives. A balance-transfer credit card can park a balance at a low or 0% promotional rate for a set period. And a hardship arrangement with your existing lenders may be the right first step if you're already struggling. There's no one-size-fits-all answer — which is exactly why a proper comparison matters.

Because this touches your home, it's worth getting a second opinion before you commit. Our refinancing service exists to run these numbers with you — the full cost of switching, the true interest saving, and whether consolidation or a smarter loan structure gets you further ahead. If you'd like a clear, honest read on your own situation, the next step is a short strategy call.

Frequently asked questions

Will consolidating my debts into my mortgage hurt my credit score?

Closing credit cards and personal loans and refinancing can cause a short-term dip because it involves a credit enquiry and a new loan. Over time, though, having fewer accounts and making consistent repayments on a single loan usually supports a healthier credit profile — provided you don't run the old cards back up.

Can I consolidate debt into my mortgage with less than 20% equity?

Sometimes, but if the new loan pushes you above 80% of the property's value you may trigger Lenders Mortgage Insurance (LMI), which can cost thousands. Many lenders also cap how much extra "cash out" they'll allow for debt consolidation, so the amount of equity you hold is a key factor. We can check your position before you apply.

How much does it cost to consolidate debts into my mortgage?

Typical costs include a discharge fee on your old loan, application or settlement fees on the new one, and possibly LMI if your loan-to-value ratio exceeds 80%. Break costs may also apply if you exit a fixed rate early. We tally these against the interest you'd save so you can see the true net benefit.

Is it better to consolidate debt into my mortgage or take a personal loan?

A personal loan usually carries a higher rate than a mortgage but a much shorter term, so you clear the debt faster and pay less total interest. Rolling debt into a 30-year mortgage lowers your monthly payment but can cost more overall unless you keep repayments high. The right answer depends on your cash flow and discipline.