Understand what you are changing
Debt consolidation combines existing debts into a new or increased loan. If you use your home loan to repay credit cards or personal loans, you may obtain a lower interest rate and fewer payment dates. But you are also increasing debt secured against your property. If you cannot meet the mortgage repayments, your home can be at risk.
A lower payment can hide a longer debt
Spreading a debt over many more years can reduce the required payment while increasing total interest. For a hypothetical illustration, a $20,000 balance at 12% over five years costs about $445 per month and $6,693 in interest. At 6% over 25 years it costs about $129 per month, but roughly $18,658 in interest.
Those rounded figures assume monthly principal-and-interest payments, unchanged rates and no fees. They are not offers. They show why the interest rate alone is not enough: the second loan is cheaper each month but much more expensive over its full term.
Compare a shorter repayment plan
If consolidation is suitable, discuss whether the consolidated portion can be tracked separately and repaid over a shorter term. Confirm the actual repayment arrangements and any restrictions. A separate split helps visibility but does not remove the property's security risk or guarantee that you will stick to the plan.
Account for costs and borrowing limits
Check refinance fees, fixed-rate break costs, the new valuation and any lenders mortgage insurance implications. Approval depends on your income, expenses, credit history and the lender's policy. Available equity does not automatically make additional repayments affordable.
Prevent the old debts from returning
If cards are paid out but left available, new balances can build up alongside the larger mortgage. Review the cause of the debt, create a realistic spending plan and discuss unnecessary facilities. Do not consolidate simply to free up limits for more spending.
Compare alternatives and get help early
Ask existing creditors about repayment arrangements and consider whether keeping debts separate is safer. If you are struggling, contact your lender's hardship team. A free financial counsellor can help you assess options; the National Debt Helpline is available on 1800 007 007. Be cautious about services charging large upfront fees to fix debt problems.
Further reading
ASIC Moneysmart: debt consolidation and refinancing.
General information only, not personal financial, tax or legal advice. Examples are hypothetical. Credit is subject to assessment and approval; securing debts against your home increases the consequences of default.