Refinancing your mortgage for debt consolidation: Know your rights

Rates and Fees verified correct on May 24th, 2017

Refinancing your mortgage to a debt consolidation loan has drawbacks. Make sure you know your rights and responsibilities so you can manage your finances successfully

Your rights when refinancing to a debt consolidation loanA mortgage refinance is often used to consolidate credit card and personal loan debts. It is seen as an attractive strategy because a home loan is normally offered at a much lower interest rate-- such as an average variable rate of 4.5%-- compared to an interest rate of around 14.5% for personal loan debt.

If you refinance to a debt consolidation mortgage, you can reap the benefits of lower interest and the ease of managing one combined payment. However, there are some risks that you need to be aware of in order to remain in control of your finances.

As a borrower, you have several rights when you refinance to a debt consolidation mortgage such as the right to negotiate and file a formal complaint, the right to free legal and financial counselling and the right to receive adequate notice in the event that your lender intends to take legal action against you.

Know your rights when you refinance to a debt consolidation mortgage to ensure that your lender and broker acts ethically and responsibly.

What should I look for in my debt consolidation home loan contract?

Lenders are required by law to provide you with documents that outline your rights and responsibilities, the home loan contract and the comparison rate schedule.

If any section of your refinancing debt consolidation home loan contract is unclear, you should ask your broker or lender to explain it to you. You should also use the following checklist to make sure that all relevant terms are included in the contract:

  • Details about the lender’s license with ASIC
  • Total amount of borrowed funds
  • Total amount to be repaid including interest charges
  • Loan term
  • Calculations and adjustments made on interest rates
  • Whether or not the debt consolidation home loan is secured
  • Whether or not mortgage guarantee insurance is required
  • All fees and charges associated with the home loan
  • How often you will be given an account statement
  • Repayment frequency

Learn more about your rights and responsibilities when refinancing a home loan.

Statistics about debt consolidation

credit card debt consolidation $4,300 - the amount of debt the average Australian has on their credit card

Interest debt consolidation$700 - the amount of interest the average cardholder pays each year

What rights should I be aware of when refinancing for debt consolidation?

  • Negotiation and complaints. Under the National Consumer Credit Protection Act 2009, you have the right to apply for a home loan repayment arrangement if you are experiencing financial hardship. If this is the case, you should speak with your lender to see if you can apply for a hardship variation (as outlined in section 72 of the National Consumer Credit Code). An option you may want to consider is whether or not you can apply for a repayment holiday (for a mortgage). When you apply for a hardship variation, your lender or bank is legally obliged to respond within 21 days to notify you of the outcome of your application. If you are not satisfied with the outcome, you can lodge a dispute with the Financial Ombudsman Service (FOS).
  • Choice of provider. When you refinance your home loan, you have the right to choose your new home loan provider. You shouldn’t be pressured or intimidated by sales representatives from a bank- you have the right to refuse them.
  • Notice from your lender. Your lender or bank must provide you with a default notice that gives you a minimum of 30 days to repay any missed payments. This must be provided to you before they take legal action.
  • Financial counselling. The Australian Securities and Investments Commission (ASIC) provides an online financial counselling service to borrowers in distress. You can also use the free Debt Self Help Online Assessment Tool to get a customised review of your debt status.
  • Free legal advice. If you need legal advice but you cannot afford to consult a solicitor, you have the right to use community legal centres, legal aid and consumer credit legal services.
  • Repossession of property. Certain procedures must be adhered to if your home is to be repossessed by your lender. If you default on your repayments, then the lender should send you a default notice with at least 30 days to fix the default. If the default and normal repayment are paid, then the contract will proceed as normal and the lender cannot take legal action. However, if the repayment is not paid within this time period, the lender can make the whole loan repayable and repossess your home to recover the debt. If this happens, the lender must provide you with a statement of claim or summons served on you for the arrears and/or the loan debt and/or the repossession of your property. If you need further information regarding your rights in this situation, you can contact a solicitor or visit the Legal Aid government website.
  • Licensed operators. Make sure that your lender or any broker that helps you is licensed by ASIC. If the lender or credit provider is not licensed (or are not a representative of a company that is licensed), then they are operating illegally in Australia and you have the right to enquire about their status. You can check to see if the operator is licensed by searching ASIC’s Professional Registers online.

Compare refinancing home loans

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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time 2 year fixed rate for owner occupiers. Conditions apply.
3.64% 4.83% $0 $0 p.a. 95% Go to site More info
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A low-interest rate loan suited for purchases and refinances with no application or ongoing fees.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
3.74% 3.74% $0 $0 p.a. 80% Go to site More info
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.75% 3.77% $0 $0 p.a. 90% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.48% $0 $375 p.a. 85% Go to site More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage a 100% offset account along with no annual or application fee.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
3.69% 3.72% $0 $0 p.a. 80% Go to site More info
Bank Australia Premium Home Loan Package - LVR<=80% $700k + (Owner Occupier)
Enjoy the discounted interest rate with redraw facility and no ongoing fees.
3.82% 4.17% $0 $350 p.a. 80% Go to site More info
IMB Budget Home Loan - Special LVR <=80% (Owner Occupier and Principal & Interest only)
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.84% 3.89% $445 $0 p.a. 80% Go to site More info
Beyond Bank Low Rate Special Home Loan
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.83% 3.83% $0 $0 p.a. 70% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.84% 4.22% $0 $395 p.a. 95% Go to site More info
State Custodians Low Rate LOC - LVR up to 80% (Owner Occupier)
No application fee and competitive interest rate to access the equity in your home.
3.69% 3.72% $0 $0 p.a. 80% Go to site More info
3.59% 4.03% $500 $0 p.a. 95% Go to site More info
Community First Fixed Home Loan - 3 Years Fixed Owner Occupier special offer (New Loans only)
A limited time fixed rate special with no monthly or annual fees plus a 100% offset account.
3.69% 4.93% $600 $0 p.a. 95% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.84% 4.71% $600 $0 p.a. 95% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow a minimum of $100,000 with a $0 ongoing fee.
3.86% 3.90% $595 $0 p.a. 80% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.97% 4.02% $445 $0 p.a. 90% Go to site More info
3.92% 4.35% $0 $395 p.a. 90% Go to site More info
3.94% 4.41% $0 $395 p.a. 90% Go to site More info
State Custodians Low Rate LOC - LVR 80% to 90% (Owner Occupier)
Borrow up to 90% property value and pay no application fee.
3.79% 3.82% $0 $0 p.a. 90% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.89% 3.89% $0 $0 p.a. 110% Go to site More info
Bankwest Equaliser Home Loan - $200k+ LVR ≤80% (Owner Occupier, new customers only)
Enjoy a variable 3 year introductory rate with Bankwest Equaliser Home Loan.
3.79% 4.20% $0 $0 p.a. 80% Go to site More info
SCU Basic Variable Rate Home Loan
A basic home loan with a low interest rate and a redraw facility available. Take out a new SCU loan and enjoy $500 cash back on loans above $150k, terms and conditions apply.
3.77% 3.81% $200 $0 p.a. 95% Go to site More info
Bank Of Queensland Economy Home Loan - Variable (Owner Occupier)
A basic home loan with additional repayment options.
3.89% 4.04% $300 $10 monthly ($120 p.a.) 95% Go to site More info
Bank Australia Premium Home Loan Package - 2 Year Fixed (Owner Occupier) LVR < 80%
A discounted 2 year fixed rate loan with high maximum LVR and no application fee.
3.94% 4.35% $0 $350 p.a. 80% Go to site More info
QT Mutual Bank Mortgage Saver Home Loan
A low rate home loan with no application or ongoing fees. Note that to be eligible for this loan you must be QLD resident.
3.95% 3.95% $0 $0 p.a. 95% Go to site More info
SCU My Life Fixed Rate Home Loan Package - 3 Years
Enjoy the same interest rate for 3 years fixed and borrow up to 95% LVR. Enjoy $500 cash back on new loans above $150k, terms and conditions apply.
3.69% 4.00% $0 $350 p.a. 95% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. NAB Rewards Points offer available, terms and conditions apply.
3.88% 4.95% $0 $395 p.a. 95% Go to site More info
CUA Fresh Start Basic Variable Home Loan - Owner Occupier
A basic mortgage with flexible repayments options.
3.99% 4.04% $600 $0 p.a. 90% Go to site More info
Heritage Bank Discount Variable Home Loan - Special Rate Offer (Owner Occupier) New Customers Only
A great interest rate home loan offer with unlimited redraw and unlimited extra payments.
3.99% 4.04% $600 $0 p.a. 90% Go to site More info
loans.com.au Essentials - Smart Loan Package P&I
This competitive rate is only available if you package your investment loan with your owner occupier loan.
3.64% 3.66% $0 $0 p.a. 80% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.99% 4.02% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate, P&I)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.74% 4.74% $0 $0 p.a. 95% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.99% 3.99% $0 $0 p.a. 85% Go to site More info
Bank of Queensland Fixed Rate Home Loan - 3 Year Fixed Rate Discount Rate $150k+ <80% LVR (Owner Occupier, P&I)
Special offer for new lending of $150k or more & under 80% LVR, this offer has been extended.
3.99% 4.49% $300 $10 monthly ($120 p.a.) 80% Go to site More info
4.09% 4.09% $0 $0 p.a. 80% Go to site More info
ME Basic Home Loan - LVR <=80% Owner Occupier
A low variable rate loan with no application or ongoing fees.
4.09% 4.11% $0 $0 p.a. 80% Go to site More info
UBank UHomeLoan - 3 Year Fixed Rate (Investor)
Pay no ongoing fees on this investment loan fixed for 3 years.
4.09% 4.46% $395 $0 p.a. 80% Go to site More info
UBank UHomeLoan Variable Rate - Real Reward Offer (Owner Occupier Interest Only)
A home loan with a competitive variable rate and no bank fees.
4.13% 4.13% $0 $0 p.a. 80% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. NAB Rewards Points offer available, terms and conditions apply.
4.17% 4.21% $600 $0 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
100% offset account, unrestricted additional repayments and no monthly account keeping fees
4.19% 4.19% $0 $0 p.a. 90% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
4.19% 4.82% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Standard Rate, P&I)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
4.34% 4.96% $0 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Standard Rate, P&I)
Get a short term fixed rate for that investment property with no application or ongoing fees.
4.34% 5.02% $0 $0 p.a. 95% Go to site More info
ANZ Simplicity PLUS Home Loan - Special Offer (Owner Occupier, P&I)
Enjoy a home loan with no application fee or ongoing fee.
4.03% 4.07% $0 $0 p.a. 95% Enquire now More info
3.88% 3.89% $600 $0 p.a. 90% Enquire now More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.88% 3.89% $0 $0 p.a. 95% Enquire now More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
A package home loan with fee free extra repayments available during the fixed term.
3.99% 5.01% $0 $395 p.a. 95% Enquire now More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.04% $0 $395 p.a. 95% Enquire now More info
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years, P&I
A low interest rate home loan and competitive two year fixed rate.
3.88% 4.94% $0 $395 p.a. 95% Enquire now More info
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier)
A variable rate home loan with competitive interest rate and flexible product features that can earn Velocity points.
3.79% 3.92% $0 $10 monthly ($120 p.a.) 80% Enquire now More info

How can I ensure that my rights are upheld when I refinance?

When you apply for a debt consolidation mortgage refinance, ensure that:

  • The lender or broker is licensed by ASIC
  • The lender or broker fully informs you of all the product details and fees and provides all the required documentation
  • Your repayments have been reduced, not increased
  • You have gained control over your debts and will benefit financially from the refinance
  • You have avoided companies that make unrealistic debt-free claims or those companies that engage in equity stripping practices

Images: Shutterstock

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)

A fixed rate package loan with flexible repayments options. NAB Rewards Points offer available, terms and conditions apply.

IMB Budget Home Loan - LVR <=90% (Owner Occupier)

A competitive budget rate without any unwanted bells and whistles.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)

Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.

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