Aussies are familiar with being in debt, having among the highest ratios of household debt to income in the world. Going by the latest OECD data, we have the fifth-highest, behind Denmark, Norway, the Netherlands and Switzerland.

And how are we coping with all this debt? Not too well it seems. Digital Finance Analytics estimates around 41% Aussie households are suffering from mortgage stress. 

Given this prevalence of debt in Australia, there’s a relatively high chance that your desk-buddy at work or the guy next to you on the train are struggling with their own debts.

Debt can be a vicious cycle too; those who have it sometimes take out more debt to cover their debts, leading to more long-term debts.

So what can you do to manage it?

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.14% p.a.
6.16% p.a.
Principal & Interest
Featured Unlimited Redraws
  • No annual fees - None!
  • Get fast pre-approval
  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
  • Home loan specialists available today
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Refinance home loan to consolidate debt: how it works

Many homeowners try to organise their debts by refinancing their home loan to consolidate them into it. Generally, this involves packaging all of your existing debts (e.g. credit cards, car and personal loans etc.) into your mortgage, so that all your debts are gradually paid off through the one monthly / fortnightly / weekly mortgage repayment.

Let’s take a look at how this works.

Guy’s debt consolidation

Guy is facing a mountain of debt at the moment from his mortgage, his credit card and the car loan he took out recently. He takes a look at all of his debts and puts them together to work out exactly how much he’s paying each month.

Debt type Amount owed Minimum Monthly repayments
Mortgage (4% interest rate) $300,000 $1,848
Credit card (17% interest rate) $5,000 $125 (at 2.5% of the balance)
3-Year Car loan (10% interest rate) $10,000 $323
Total $315,000 $2,296

Given that Guy’s monthly pay is $4,525 after tax ($70,000 gross salary), his total debt repayments account for over half of that. When he factors in his rent, utility bills, groceries and other costs like transport, he doesn’t have much left to save.

Guy speaks to his lender about refinancing his home loan to consolidate his debts. He’s five years into his 25-year $350,000 mortgage, with $300,000 remaining. Since he has a strong equity position (with an LVR of under 80%), his lender agrees to add the $15,000 of credit card and car loan debt to his mortgage and refinances him to a $315,000 25-year mortgage at the same interest rate of 4% p.a. His monthly repayments now look like this:

Debt type Amount owed Monthly repayments
Debt Consolidated Mortgage (4% interest rate) $315,000 $1,663

Under this new debt consolidation loan, Guy’s monthly repayments have now been reduced by $633 to $1,633, giving him some much-needed breathing room at the end of every month.

However, with his loan term extended back to 25 years (he had 20 years remaining before he refinanced), he will pay significantly more in interest over the life of the loan, unless he makes additional repayments when he’s in a better position.

Advantages of refinancing to consolidate debt

Based on the example above, refinancing your home loan to consolidate your debts can save you money in the short term (if you do it right).

It can also be much easier to just have one loan to repay. Making repayments to three, four or five different lenders can mean more paperwork, more time and more stress, so cutting these extra stakeholders out can make it easier to sort out your finances.

Disadvantages of refinancing to consolidate debt

This strategy definitely isn’t foolproof. Perhaps the biggest drawback to consolidating smaller debts into your mortgage is that you’re stretching these short-term debts over a much longer term. While the interest rate on the mortgage may be significantly lower than the rates on the credit card or car loan, the interest will be accruing over a much longer period. The general rule is longer loan term = more interest costs – this is why making extra or more frequent repayments can reduce how much you pay.

You should also take into account the upfront costs of refinancing, which can set you back thousands. If you’re struggling with debt, chances are you might not be able to afford these costs.

If you’re experiencing financial hardship and have a poor credit rating, many lenders actually might not allow you to refinance your home loan to consolidate debts. If things have taken a turn for the worse, you can call the National Debt Helpline on 1800 007 007 to talk through what your options are.

Using home equity for debt consolidation

In order to refinance your existing home loan into a new one that allows you to consolidate your debts, you will need to have some built up equity in the property.

Because of the extra risk you may present, lenders will look to the value of the property to determine your equity, and they’ll usually allow you to borrow up to 80% of the value of the property. The more of your mortgage you’ve paid off already, the higher your chances of being approved for a favourable new loan.

How to refinance mortgage and consolidate debt

Refinancing might seem complicated, but it’s a pretty simple concept: you either change to a different loan with your existing loan provider or switch to a new provider with more favourable terms.

Contact your current lender first about your desire to consolidate your debts with a new home loan. If they aren’t willing, you could try contacting other lenders. Home loans are a competitive market right now, and there is no shortage of options out there that could have better interest rates, fees, features and lending conditions than what you might have now.

You can use our calculator to calculate mortgage repayments and compare the total costs of different loans. This can help you decide whether or not it’s worth refinancing.’s two cents

Debt consolidation is not a magic pill that magically removes all of your problems – it’s just a way for you to better manage your debts.

Unless you change your spending behaviour, you may not ever get out of the debt cycle. Work out how you got yourself into this predicament and what you can do to prevent yourself from falling deeper into the debt hole.

Something to be aware of as well is that some lenders might try to charge you a higher interest rate when refinancing. This might be because all of your extra debts make you appear to be a higher risk, but choosing such a loan could be disastrous. A loan that’s even a few basis points higher could cost you thousands of extra dollars by the end. Make sure you also ask the lenders what the refinancing costs will be and what their ongoing fees are.

Before you consolidate, you should also consider less-drastic debt management methods. Many money experts around the world advocate for the ‘snowball’ or ‘domino’ method of focusing on paying off debts one at a time, starting with the smallest debt, while making the minimum repayments on the other debts. This method plays into psychology – the borrower gains more confidence in their debt-repayment abilities after the “quick wins” of paying off the smaller debts, motivating them to tackle the bigger debts.

Another method is the ‘avalanche’ strategy of paying off the debts with the highest interest rates first, which can save you more in interest but can be psychologically harder than the ‘snowball’ method.

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