Refinance / Restructuring
Can You Consolidate Debt Through Refinancing?
5 min read- Finance Guide
- Updated 2026
Quick answer
Debt can often be consolidated when refinancing up to around
80% to 90%
Of the property value, depending on lender policy, property type, and whether mortgage insurance is acceptable
- Main approval factors Equity + serviceability
- Debts commonly considered Cards, loans, ATO
- Main risk Unsecured becomes secured
1300 421 044
1300 421 044
Key concepts in debt consolidation refinancing
Available equity
The lender needs enough usable equity after paying out the existing mortgage and the debts being consolidated
Debt types
Credit cards, personal loans, car loans, and some ATO debts may be included, subject to policy and documentation
Serviceability
The new lender tests whether the single refinanced repayment is affordable using current income, liabilities, and living costs
Total cost over time
A lower rate can help, but extending short term debts over a long mortgage can increase total interest paid
Ways debt can be consolidated
When refinancing to consolidate debt, the structure matters just as much as the rate. A cleaner structure can improve cash flow, preserve flexibility, and reduce tax confusion later on.
In practical terms, consolidation usually means the new lender repays the existing mortgage and selected unsecured debts at settlement. The borrower is then left with one larger secured loan. That can make budgeting easier, but it also means debts that were previously unsecured may now be tied to the property.
This is why the best debt consolidation refinance is not simply the one with the lowest advertised rate. It is the one that lowers complexity, remains affordable under lender servicing rules, and has a realistic plan to reduce debt rather than recycle it.
One loan
Single repayment
Multiple unsecured debts are cleared at settlement so the borrower has one ongoing repayment instead of many
Split structure
Separate loan splits
Some borrowers use separate splits for owner occupied debt, investment debt, and consolidation amounts to keep the purpose of each balance clearer
Direct payout
Creditors paid at settlement
Lenders often prefer the refinance proceeds to directly close cards and loans rather than leaving funds sitting in the borrower account
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What lenders usually assess
Lenders normally review the following when assessing a debt consolidation refinance application:
They are usually looking for a sensible reason for the refinance, enough equity to support the new total loan, and evidence that the borrower will not be worse off after the change. Clear statements for every debt being repaid are usually important because payout figures and credit limits need to be verified before settlement.
-
01. Payslips, tax returns, and business financials where relevantIncome verification
-
02. Statements for the debts being paid out and recent repayment conductLiabilities and conduct
-
03. Security value, usable equity, and whether the refinance still fits policyProperty and LVR
Common problems with debt consolidation through refinancing
The biggest mistake is focusing only on the new monthly repayment. Debt consolidation can absolutely help in the right circumstances, but the decision should also consider total cost, discipline after settlement, and whether investment and private borrowing purposes are being mixed in a way that creates future problems.
Not enough equity
If the property value is lower than expected, there may not be enough room to pay out the existing mortgage and the extra debts.
Possible solutions include:
Reduce the amount of debt being consolidated- Contribute cash to reduce the payout figure
- Review whether mortgage insurance or a different lender is suitable
Lower repayment but higher lifetime cost
Rolling short term debts into a 20 to 30 year home loan can reduce monthly pressure while increasing the total interest paid over time.
Possible solutions include:
- Compare total interest, not just the monthly repayment
- Keep the new term aligned with your real payoff plan
- Use extra repayments to avoid debt simply being stretched out
Tax and loan purpose issues
If investment and private debts are mixed together carelessly, it can create record keeping issues and may affect future interest deductibility on the investment portion.
Possible solutions include:
- Use separate loan splits for different purposes
- Keep clear records of what each portion was used for
- Get tax advice where investment property debt is involved
Steps to consolidate debt through refinancing
Step
01
List every debt to be cleared, including balances, limits, and payout figures
Step
02
Estimate the property value, existing loan balance, and usable equity
Step
03
Gather income documents, mortgage statements, and debt statements
Step
04
Compare lenders based on policy, total cost, and how they treat consolidation
Step
05
Apply, complete valuation, and confirm which debts will be paid out at settlement
Step
06
Settle the refinance, close redundant facilities, and avoid rebuilding the cleared debt
Speak with a Property Finance Specialist
Debt consolidation through refinancing can vary significantly depending on the property value, current loan balance, type of debts being repaid, and the borrower's current income position.
A specialist can review the figures and help determine whether refinancing is likely to improve cash flow, reduce interest, or simply shift debt around.
Speak with a finance specialist about refinancing and debt consolidation.
Submit the short form below and a property finance specialist can review your current loans, debts, equity position, and possible refinance options.
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