Consolidating your debt into your home loan

Dealing with debt can be stressful. You might be managing multiple payments to different lenders or paying various interest rates across accounts. You may just have an outstanding credit card debt hanging over your head. Many people choose to consolidate their debt into their home loan to simplify the process by making one regular payment or potentially save on rates and fees.

Smaller debts can be incorporated into your home loan. After consolidating, you can restructure your repayments to get debt-free sooner, for example you may wish to raise your payments slightly or make them more frequently.

There are many types of debt that you are able to consolidate into your home loan such as:


  • Personal loans
  • Credit cards
  • Store cards

Interest rates on small debts are usually set quite high, which means that consolidating them into your loan should save you money in the long run. For example, if you purchased a car with a personal loan then you might pay interest rates as high as 12%pa from some lenders. However, after consolidating, you could tie it to a much lower and more attractive interest rate.

Things to remember
If you are thinking about consolidating your debt into your home loan, you might want to speak to a mortgage broker first. There can be costs involved in consolidating your debts, and you will need to see if this option is suitable for your financial situation.

Also know that, any lender who you consolidate with will want to see a three month payment history. Your broker can clarify any lender requirements with you.

Remember, once you consolidate your debt it will all become a 'secured debt' - you'll need to have the financial means to stay on top of your regular repayments or face penalties. You'll want to keep your spending in check so it’s a good idea not to seek further credit cards or loans unless you’re sure you can pay it back quickly. It’s also a good idea to create a household budget so you can manage your future spending.