The easiest way to consolidate debt with refinancing

Refinancing to consolidate debt means rolling your personal loans, credit cards, and other high-interest debts into your home loan.

You are paying interest on multiple debts at different rates, often 10% to 20% on credit cards and personal loans compared to 6% to 7% on a mortgage. Consolidating those debts into your home loan drops the rate and gives you one repayment instead of juggling four or five. The challenge is doing it without stretching your loan term so far that you end up paying more interest overall.

Consider a heavy diesel mechanic on a two-week-on, one-week-off roster who has $25,000 across a car loan, credit card, and a personal loan taken out for tools and a ute upgrade. The combined monthly repayments sit around $1,200. By refinancing the home loan and consolidating that $25,000 into the mortgage, the monthly commitment drops to around $150 extra on the home loan repayment. That frees up over $1,000 a month in cashflow, which matters when you are managing expenses during shutdown periods or between contracts.

Does consolidating debt into your mortgage actually save money?

It depends on how you structure the new loan term. If you add $25,000 to your mortgage and extend the loan term back to 30 years, you will pay less each month but more interest over time. If you keep the same remaining loan term or shorten it slightly, you save on both fronts.

In our experience working with FIFO workers, the ones who consolidate debt and keep their loan term unchanged see the biggest benefit. The lower rate does the heavy lifting. Instead of paying 15% on a credit card, you are paying your home loan rate on that same balance. Even if your mortgage rate sits at 6.5%, that is a significant drop. The monthly saving on interest alone can be redirected into the loan or kept as a buffer during rostered time off.

The other factor is whether you keep using the credit cards and personal loans after consolidation. If you clear the balances, then rack them up again, you end up with the same debt plus a higher mortgage. That is where discipline matters, and it is worth having that conversation before you refinance.

What debts can you consolidate when refinancing?

Most personal debts can be rolled into a home loan refinance. Credit cards, personal loans, car loans, and even tax debts are all on the table. What you cannot consolidate are business debts unless they are personally guaranteed, or debts tied to another property.

Lenders will ask for statements showing the current balances and repayment history. If you have missed payments or defaulted in the past six months, that can affect your refinance application. FIFO workers sometimes see late payments during roster changes or when mail piles up during swings, so it is worth checking your credit file before you start the refinance process. A loan health check picks up those issues early.

Some lenders also cap how much debt you can consolidate based on your loan-to-value ratio. If you are already borrowing 85% of your property value, adding another $30,000 in debt consolidation might push you over the threshold. That is where having usable equity matters, and why a property valuation is part of the refinance application.

How much equity do you need to consolidate debt?

You need enough equity to cover the debt you want to consolidate plus any refinancing costs. If your property is worth $500,000 and you owe $350,000, you have $150,000 in equity. Lenders will typically let you borrow up to 80% of the property value without paying lenders mortgage insurance, which means you could access up to $400,000 in total. That leaves $50,000 available to consolidate debt before you hit the 80% threshold.

Going above 80% is possible, but you will pay lenders mortgage insurance on the amount over that limit. For a FIFO worker who has already paid LMI on the original loan, paying it again on a refinance rarely makes sense unless the debt consolidation saves more than the LMI cost. We regularly see this with workers who have had a few roster changes or contract gaps and have leaned on credit cards to cover the shortfall. The equity is there, but structuring it right is what keeps the refinance worthwhile.

If your equity is tight, another option is refinancing just the mortgage and setting up a separate debt consolidation loan at a lower rate than your current debts. It is not as clean as rolling everything into the home loan, but it still improves cashflow and keeps your mortgage balance manageable.

What happens to your repayments after consolidating debt?

Your home loan repayment increases, but your total monthly commitments drop. Using the earlier example, adding $25,000 to a mortgage with 20 years remaining increases the monthly repayment by around $150 to $180, depending on your rate. But you have just cleared $1,200 in monthly debt repayments, so your net position improves by over $1,000 a month.

That extra cashflow can go into an offset account to reduce interest further, or into paying down the mortgage faster than the minimum repayment. FIFO workers with variable rosters often benefit from keeping that extra cashflow accessible rather than locking it into higher fixed repayments. An offset account gives you the flexibility to draw on those funds during shutdown periods without touching a credit card or redraw facility.

The other option is keeping your total monthly commitment the same as it was before consolidation. If you were paying $1,200 across all debts, you could refinance and consolidate, then redirect that same $1,200 into the mortgage as extra repayments. That clears the mortgage faster and cuts years off the loan term.

When does refinancing to consolidate debt not make sense?

If your home loan is already on a low rate with an offset account and good features, refinancing just to consolidate a small amount of debt might not be worth the application costs and time. Refinancing typically costs between $500 and $1,500 in valuation fees, discharge fees, and application fees. If you are consolidating $5,000 in credit card debt, the saving might not cover those costs within a reasonable timeframe.

It also does not make sense if you are planning to sell the property within the next 12 months. Refinancing takes a few weeks to settle, and if you sell shortly after, you will pay discharge fees on the new loan without seeing much benefit from the consolidation.

Another scenario where it falls apart is if your income has dropped or you have had a recent contract gap that affects your borrowing capacity. Lenders assess your ability to service the new loan amount, and if consolidating the debt pushes your total borrowing above what your current income supports, the application will not go through. FIFO workers coming off a higher-paying contract or moving to a lower day rate can hit this issue, especially if they have relied on overtime or allowances that are no longer guaranteed.

How long does the refinance process take when consolidating debt?

From application to settlement, refinancing to consolidate debt usually takes three to five weeks. The timeline depends on how quickly you provide documents, how long the lender takes to value the property, and whether any issues come up during the credit assessment.

FIFO workers on swing can sometimes stretch that timeline if paperwork gets delayed while they are on site. Submitting payslips, bank statements, and debt statements before you start your next swing keeps the process moving. Most lenders now accept digital documents, so you can upload everything from your phone or laptop without waiting to get home.

Once the loan is approved, the lender will pay out your existing debts directly as part of the settlement process. You do not need to clear the debts yourself and then refinance. The new loan covers the old mortgage balance plus the debts you are consolidating, and the lender distributes the funds at settlement. That means your credit cards and personal loans are cleared on the same day your refinance settles.

If you are coming off a fixed rate period, timing your refinance to consolidate debt around the fixed rate expiry avoids break costs and makes the process more cost-effective. Refinancing a few weeks before your fixed term ends gives you time to compare rates and structure the new loan without paying penalties on the old one.

Call one of our team or book an appointment at a time that works for you.

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