Consolidating debt to help pay your mortgage faster

Juggling too many debts is never fun. Personal loans, credit cards, car loans, mortgage repayments – trying to manage so many different repayments can be stressful. One way to simplify your finances is to bring all your loans together in one place. This is known as debt consolidation. Not only could it make managing your finances easier, but it could potentially save you some money as well.

What exactly is debt consolidation?

Debt consolidation is when you combine your outstanding debts into one loan. So rather than paying off different loans like your credit card, personal loan and car loan at different interest rates - and sometimes with different lenders - you just have one loan, one regular repayment and one interest rate.
 
There are generally two ways to do it:


1. Consolidate into your home loan

 
One of the biggest potential benefits of consolidating into your home loan is having just one repayment to monitor, which can help make managing your finances easier.

Typically, interest rates on home loans are lower than other lending options, so if you roll all your debt into your home loan you could be paying less interest each month. You could put what you save in interest towards making extra home loan repayments to help pay your mortgage off faster. However, keep in mind that you might end up paying more interest in the long term – home loans have a longer loan term, which means a greater number of monthly repayments over time.

Use our extra repayments calculator to see how much money and time you could save by making extra home loan repayments, and see some more tips to save money on your mortgage.

2. Consolidate all your debts into one personal loan
 
You can also combine all your debts into one personal loan. This could potentially save you money by eliminating multiple fees across multiple debts. And if you find a loan with a lower interest rate than the one on your existing debts, you’ll be paying less in monthly interest.

See more about taking control with a debt consolidation personal loan.

Debts with other lenders?

Don’t worry if you have debts with multiple financial providers. You can still consolidate them into one loan. For example if you have a personal loan with a different provider to your home loan you can consolidate your debts and essentially pay off the personal loan by adding it to your home loan.


How do you do it?


The first step is to talk to your lending specialist, either your broker or Home Finance Manager. With their expertise in home loans and lending, they’ll be able to answer your questions and help you go through your options. 

What else to consider

  • If you consolidate into your home loan, your other debts will be added on to the home loan, so be aware that your home loan balance will increase
  • Rolling other debts into your home loan will likely affect your loan to value ratio (LVR). This could end up changing your interest rate
  • You should make sure that your debt consolidation doesn’t drop you below an 80% LVR, otherwise you will need to pay Lenders Mortgage Insurance (LMI)
  • If you’ve already started paying your mortgage and you then consolidate your personal debt into your mortgage, any equity you may have gained in your property will decrease
  • Every situation is different, so make sure you explore what’s best for you personally.

Find a home loan to suit you

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Things you should know

Important things you should know: The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.