Refinance Home Loan – Escape Debt Quickly (2026)

Are you feeling overwhelmed by multiple debts and high-interest rates, wondering if there's a way out? Refinancing your home loan might be the silver bullet you need to consolidate your debts and regain financial control. By understanding how refinancing works, you can leverage your mortgage to pay off credit cards, personal loans, and other debts, potentially saving thousands of dollars in interest and reducing your monthly financial burden.

Understanding Refinancing to Pay Off Debt

Refinancing a home loan involves replacing your existing mortgage with a new one, usually to secure a lower interest rate or better loan terms. When you refinance to pay off debt, you essentially increase your home loan amount to cover your other liabilities, using your home equity as collateral. This strategy can simplify your finances by combining multiple debts into a single, more manageable monthly payment.

Rates, Requirements, and Options

As of 2026, mortgage interest rates in Australia range between 6.49% and 12%, depending on the lender and your financial profile. When considering refinancing, it’s crucial to compare these rates with the interest rates on your existing debts, such as credit cards with rates often exceeding 20% or personal loans around 14%.

Eligibility criteria for refinancing include having sufficient home equity (typically at least 20%), a stable income, good credit history, and a low debt-to-income ratio. Lenders on Esteb and Co's panel, which include over 83+ options, offer diverse terms, allowing you to find a solution tailored to your needs.

Steps to Refinance Your Home Loan

Refinancing to pay off debt can be a strategic move if executed correctly. Here’s a step-by-step guide to help you through the process:

1. Assess Your Financial Position: Start by calculating your total debts, current interest rates, and monthly repayments to understand your financial landscape.
2. Evaluate Your Home Equity: Check your property's current market value and subtract your remaining mortgage balance to determine your equity.
3. Research Lenders: Use Esteb and Co's extensive lender panel to explore various refinancing options, comparing interest rates, fees, and loan features.
4. Apply for Pre-Approval: Once you've identified a suitable lender, apply for pre-approval to gauge the amount you can borrow and the associated terms.
5. Prepare Necessary Documentation: Gather all required documents, including proof of income, credit history, and property details, to streamline the application process.
6. Submit Your Application: Complete and submit your refinancing application with the chosen lender, ensuring all details are accurate and complete.
7. Settle Your Debts: Upon approval, use the additional funds from your refinanced mortgage to pay off your high-interest debts, effectively consolidating them into your home loan.

Tips and Considerations

Before you rush into refinancing, consider these expert tips to ensure it’s the right move for you:

• Calculate Total Costs: Factor in refinancing costs such as application fees, valuation fees, and potential break fees from your current lender to ensure savings outweigh expenses.
• Consider Loan Features: Look for loans with features like offset accounts or redraw facilities that can help you manage your finances more efficiently.
• Evaluate Your Financial Discipline: A refinanced loan offers lower interest, but extending your mortgage term could mean paying more in the long run. Ensure you maintain discipline to pay off your debts faster.
• Consult a Mortgage Broker: Leverage the expertise of an Esteb and Co mortgage broker to navigate the complexities of refinancing and secure the best deal for your circumstances.

Frequently Asked Questions

1. Is refinancing to pay off debt a good idea?

   It can be beneficial if the new loan offers a lower interest rate than your existing debts, reducing your overall interest payments and simplifying your financial management.

2. What are the risks of refinancing?

   The main risk is extending your mortgage term, which could increase the total interest paid over the life of the loan. It’s also important to consider refinancing costs.

3. How much equity do I need to refinance?

   Lenders typically require at least 20% equity in your home, although some may offer refinancing with less equity under specific conditions.

4. Can I refinance with bad credit?

   While challenging, it’s possible to refinance with bad credit, particularly with the help of a mortgage broker who can find lenders willing to work with less-than-perfect credit profiles.

5. How long does the refinancing process take?

   The process can take anywhere from a few weeks to a couple of months, depending on the lender and the complexity of your financial situation.

6. Will refinancing affect my credit score?

   Refinancing can temporarily affect your credit score due to credit inquiries, but the long-term impact is usually minimal if you maintain timely repayments.

7. Can I refinance multiple times?

   Yes, but it’s important to weigh the costs and benefits each time to ensure it’s financially advantageous for you.