Can You Consolidate Business Debt Into a Property Refinance?
Property Lending Hub
Cash Out Policy · Consolidation · Property Refinance
Yes, sometimes. An Australian business owner can use a refinance against a home or residential investment property to clear selected business and other debts. The file has to pass three tests: the lender must accept each payout purpose, the new balance must sit inside its LVR and cash-out policy, and the resulting loan must service. The published residential policies reviewed here disagree sharply, which is why there is no single Australian cap.
Quick Answer
Yes, sometimes. A business debt consolidation refinance has to pass three gates in order: purpose, whether the lender will fund each debt you want cleared; equity and LVR, where the larger loan will sit against the property value; and servicing, whether the resulting loan fits the income. In the two published residential policies reviewed on 3 September 2026, both cap accumulated unsecured debt at $50,000; one permits no debt consolidation above 80% LVR apart from a $5,000 allowance for costs, while the other permits cash out up to 90% LVR subject to its conditions. Those figures are lender policy, not Australian market or legislative limits.
Also called: business debt consolidation, business debt into a home loan, cash out refinance, equity release refinance, business debt refinance, debt consolidation home loan, refinancing to pay out debt.
What is business debt consolidation into a property refinance?
Business debt consolidation into a property refinance means increasing or replacing borrowing against residential property and using the additional funds to pay out selected business and other debts. The debts can be paid to zero as part of settlement, but a zero balance does not necessarily close an old facility, so account closure and any security release need to be confirmed afterwards.
For a business owner, the deciding question is not simply how much equity is in the property. A lender assesses the file in three gates: purpose first, whether it will fund each debt or payout; equity and LVR second, where the larger loan lands against the property value; and servicing third, whether the resulting loan fits the income. A cash out refinance is the mechanism underneath the transaction. Whether consolidating is the right lever for the business in the first place is a separate question, covered in the wider business debt consolidation guide.
Is this the same as consolidating credit cards into a home loan?
No. The mechanism can look similar, but a business-owner stack is harder because the debts do not all sit in the same part of lender policy. A credit card and personal loan are ordinary unsecured liabilities. A business overdraft, equipment facility, trade account or tax liability can trigger business-purpose caps, evidence rules, security releases or an outright purpose exclusion. The lender is therefore deciding what each line of the stack is, not just adding the balances together.
| The question | Consumer debt consolidation | Business debt into a property refinance |
|---|---|---|
| What is in the stack | Credit cards, a personal loan, a car loan | An overdraft, equipment finance, trade accounts, tax debt and sometimes personal debts as well |
| What decides the answer | Usually the LVR, servicing and ordinary debt-consolidation policy | Purpose, business-purpose caps, resulting LVR, servicing and evidence for each liability |
| Whether the credit is regulated | Ordinarily yes where the purpose is personal, domestic or household | Not automatic, because the test turns on the predominant purpose of the credit |
| Whose name the debts are in | Usually the property owner's own name | The debt may sit in a company or trust while the residential property sits in an individual's name |
| What happens after payout | Old facilities still need to be closed or reduced as agreed | Account closures, guarantees and PPSR or other security releases can all need follow-through |
Does this guide cover a home, residential investment property or commercial property?
The lender-policy figures quoted in this guide are residential lending policy. They may be relevant where the security is an owner-occupied home or a residential investment property, subject to the lender's rules. They should not be carried across to commercial-property lending. The 80%, 90%, $50,000, $100,000 and $500,000 figures on this page are not commercial-property market limits.
Is this the same as debt recycling?
No. Debt recycling is an investment strategy: part of a home loan is paid down, redrawn and invested, with the aim of changing the character of the debt over time. Consolidation moves in the other direction. Existing balances are paid out and the aim is to replace several repayments with a cleaner structure. Both can involve releasing funds against a property, which is why the terms get mixed together, but the purposes are different. Questions about deductibility belong with your accountant.
Which situation are you in before you apply?
Five different problems arrive at this page and only one is a straightforward full refinance. In two of them, the first move may not be a new application at all. In another, refinancing the whole first mortgage can be the wrong structure even where the debt itself is fundable. Sort the starting problem before you sort the lender.
| Where you are starting from | What it actually is | What to do first |
|---|---|---|
| Every facility is current, but the combined repayments are too high | The cleanest consolidation case | List every debt, check the purpose of each one, then calculate the resulting LVR and servicing |
| You are behind on one or more repayments | Potential hardship or arrears rather than ordinary consolidation | Ask the lenders you already have for hardship assistance before lodging another application |
| The ATO is most of the problem | A lender-specific purpose question | Effectively engage with the ATO and confirm whether the proposed refinance lender will fund tax debt before applying |
| You already applied somewhere and were declined | A purpose, numbers or conduct problem that has not yet been diagnosed | Find the actual decline reason before creating another enquiry |
| Your existing first mortgage is cheap, fixed or otherwise worth preserving | A structure question, not just a consolidation question | Compare a full refinance with a top-up or second mortgage, including break costs and the total cost of keeping two facilities |
The last row is easy to miss. A full refinance can solve the debt problem and still be the wrong transaction if it forces a strong first mortgage to be replaced. The comparison should be the cost of the whole new structure, not simply the rate on the extra money. The same logic applies after a decline: a second application is useful only if something about the lender, purpose, numbers or structure has actually changed.
What can you do before you apply to anyone?
Start with a debt map, not a borrowing-capacity calculation. For every liability, write down the creditor, the legal borrower, current limit, current balance, payout figure, repayment, whether it is current or in arrears, what security or guarantee sits behind it, and whether the facility must be closed. That one page tells you which debts are ordinary payouts, which are business-purpose questions and which need a different conversation before any lender sees the file.
After the debt map, four non-credit levers can change the file or remove the need to borrow more.
| Lever | What it does | What to watch |
|---|---|---|
| Ask an existing lender for hardship assistance | A small business can still ask its firm for assistance even though it does not have the same hardship rights as an individual | Financial hardship information can appear on a consumer credit report and has its own retention period |
| Effectively engage with the ATO | A business that is effectively engaging to manage its tax debt is outside the ATO's credit-reporting test while that engagement continues | A complying payment plan is one form of engagement, not the only one, and interest or other charges can continue |
| Close or reduce unused revolving limits | Removes available commitments that can continue to weigh on an assessment even where the drawn balance is low | You lose the liquidity buffer those limits were providing |
| Reduce or split the consolidation request | Can keep the new loan below an LVR or purpose-policy cliff and leave an excluded debt outside the refinance | You may still have more than one repayment, so compare the full cash-flow result rather than chasing a one-payment headline |
ASIC's review of ten large home lenders, published 20 May 2024, found that around 35 per cent of customers who gave a hardship notice withdrew or were declined for non-response, and 40 per cent of those who received reduced or deferred payments fell into arrears when the assistance ended. That review covered home lending rather than small-business lending, so it describes process rather than your legal rights. It is still a useful warning not to treat a first non-response as the end of a hardship conversation.
If the firm will not move, the Small Business Debt Helpline and National Debt Helpline provide free financial counselling, and ASIC Moneysmart points to the National Debt Helpline on 1800 007 007. For some readers, that is a better first call than a broker. Moneysmart also says to consider other options before consolidation and to check that the new structure costs less overall, does not simply extend the term, is affordable, and is accompanied by closing or reducing old credit.
The order is the point: map the debts, check the purpose, then calculate the equity, then test servicing. Doing the property arithmetic first and the purpose test last is how a file with plenty of equity can still end in a decline.
How much equity can you actually release to pay out debt?
There is no single Australian cash-out cap. What exists is the credit policy of the lender you go to, and the published policies reviewed for this guide are residential policy rather than commercial-property policy. The arithmetic gives you an outer limit only. It does not tell you whether the lender will accept the debts inside that amount.
The calculation is simple: accepted property value, multiplied by the lender's permitted LVR for that purpose, minus the existing mortgage payout and transaction costs. Then the purpose and servicing tests still have to pass.
| Step | What you take | What it turns on |
|---|---|---|
| 1. Start with the value of the property | The valuation the lender accepts | The lender's valuation, not a portal estimate or an agent appraisal |
| 2. Multiply by that lender's ceiling | A percentage of value set in that lender's credit policy | Policy, which differs sharply between lenders and changes without notice |
| 3. Subtract what is still owed | The payout figure on the existing mortgage | The nominated payout date, not the balance on your last statement |
| 4. Subtract the costs of the transaction | Discharge, registration, valuation and any break costs | The lenders and the jurisdiction involved |
| 5. What is left is the outer limit | A ceiling, not an entitlement and not an approval | Whether the purpose is fundable, and whether the new repayment fits the income |
The setting that catches people is not the ceiling, it is the cliff underneath it. One published policy permits no cash out, equity release or debt consolidation at all once the loan passes 80 per cent of the property's value, beyond a $5,000 allowance for costs, which means a consolidation that pushes you just over that line does not shrink, it disappears. Another published policy will accept cash out to $500,000 without documentary evidence of the use of funds, up to 90 per cent. Same question, two published answers, an order of magnitude apart. Both were read on 3 September 2026 and both change without notice.
| Policy point | Policy A | Policy B | What decides it on your file |
|---|---|---|---|
| Cash out or equity release up to 80% LVR | Equity release and cash out listed as an acceptable purpose, with no cap stated on the release component, subject to risk profile, capacity and collateral | Cash out to $500,000 without documentary evidence of use of funds, to 90% LVR | The individual lender's credit policy, not a market rule |
| Cash out above 80% LVR | None permitted beyond a $5,000 allowance for costs | Above 85% base LVR the cash out component is capped at 20% of security value, with supporting documents | Where your LVR lands after the debts are added |
| Unsecured debt consolidated | Maximum $50,000 of accumulated unsecured debt, and none at all above 80% LVR | Maximum 5 debts, with the same $50,000 accumulated unsecured ceiling | The size and number of the debts you want cleared |
| Tax debt as a purpose | Listed as an unacceptable purpose | Not listed among acceptable purposes | Whether the lender will fund it at all |
| Business purpose | Acceptable only where it does not exceed 50% of the total loan amount; predominantly business related purposes are unacceptable | Restricted to 10% of total customer exposure, maximum $100,000 | Whether the debt being cleared is business or personal |
Policy A: Macquarie Bank residential home loans credit guidelines, version 14.0, last updated 8 July 2026, read 3 September 2026. Policy B: AMP Bank distributor home loan policies, accessed 27 August 2026, re-read 3 September 2026. Read the table as a snapshot, not a survey: two published residential policies on one date, not the whole market, not commercial security policy, and both subject to change without notice.
Two boundaries are worth naming so you read the right page. The general question of how an equity release refinance works more generally, and the general loan to value ratio question that sits behind it, are covered elsewhere. What changes here is only what happens when the use of the funds is a debt payout. If you want to walk the numbers on a specific property, you can talk through a refinance against your property.
Do you have to refinance your whole first mortgage to consolidate the debt?
No. A full refinance is only one structure. If the existing first mortgage is worth keeping, compare a loan increase or top-up with that lender, a separate split, or a second mortgage that leaves the first mortgage in place. The comparison has to use the cost of the whole structure, not only the rate on the new money. A low-rate or fixed first mortgage can be expensive to replace once break costs, discharge costs and the pricing of the new total balance are included.
A second mortgage is not a universal workaround. The second lender, the existing facility documents and the security position can create consent or priority requirements, and the second-ranking facility will usually be priced differently from a first mortgage. Read second mortgage versus refinancing the first loan before assuming the whole first mortgage has to move.
Which debts will a lender let you roll in?
There is no universal debt list. The reviewed policies treat ordinary unsecured consolidation, business-purpose debt, tax debt and catching up existing repayments differently. The safest way to read the table is liability by liability: if a debt is not expressly named, that does not make it automatically approved.
| Debt or liability | Treatment in the reviewed policies | What to check before applying |
|---|---|---|
| Credit cards and personal loans | Ordinary unsecured debt consolidation, but capped | Both reviewed policies cap accumulated unsecured debt at $50,000; one also limits the total number of debts and one permits none above 80% LVR apart from costs |
| Business overdraft or unsecured business loan | Business purpose, subject to separate exposure limits | One reviewed policy limits business purpose to no more than 50% of the total loan amount; the other restricts it to 10% of total customer exposure to a maximum of $100,000 |
| Equipment or vehicle finance used by the business | Not separately named as a universal category in the two policies reviewed | Treat it as a lender-specific business-purpose payout and confirm the payout process plus release of any asset security or PPSR registration |
| Trade or supplier debt | Not separately named as an automatic acceptable purpose | Confirm whether the lender will treat the payout as an acceptable business purpose rather than assuming it sits inside ordinary debt consolidation |
| ATO tax debt | Lender-specific and expressly excluded at one reviewed lender | Ask the purpose question before the application, because enough equity does not override an excluded purpose |
| Arrears or money needed to catch up existing repayments | Excluded at one reviewed lender | One reviewed policy names meeting repayments on existing commitments as an unacceptable purpose; if you are already behind, start with hardship and diagnosis rather than another application |
Sources: Macquarie Bank residential home loans credit guidelines, version 14.0, last updated 8 July 2026, read 3 September 2026; AMP Bank distributor home loan policies, accessed 27 August 2026, re-read 3 September 2026. Two published residential policies on one date, not a market survey, and subject to change without notice.
The practical distinction is between named treatment and silence. If a policy says tax debt is unacceptable, the answer is clear at that lender. If it does not separately name supplier debt or equipment finance, the correct answer is not "yes". It is "confirm how that lender classifies this payout before applying".
Where the stack mixes business and personal liabilities, the business-purpose caps and the regulated-credit perimeter can both matter. The mechanics of releasing equity are covered separately; this section is about what the money is being used to clear.
What evidence do you need, and who actually pays the creditors?
Build the file from the payout schedule backwards. For every liability being cleared, the lender needs enough evidence to identify the debt, confirm the amount required on the settlement date, understand who legally owes it and work out what must be closed or released after payment. A payout figure is therefore more useful than a statement balance, and a discharge authority is needed where the outgoing lender requires an instruction to release its security.
Alongside the payout figures, expect current statements for the facilities being cleared and the ordinary income evidence for the new loan. Where the requested cash out runs past a lender's unevidenced threshold, the lender can add documentary evidence of the use of funds or move the request into exception territory.
| Figure | What it governs | Source, read 3 September 2026 |
|---|---|---|
| $500,000 | Cash out accepted without documentary evidence of the use of funds up to 90% LVR in one reviewed policy; between $500,000 and $1,000,000 that policy requires evidence by statutory declaration, and above $1,000,000 it is considered on an exception basis | AMP Bank distributor home loan policies, accessed 27 August 2026 |
| $50,000 | Accumulated unsecured debt ceiling for consolidation in both reviewed policies, with one also limiting the total number of debts | Macquarie Bank residential home loans credit guidelines version 14.0, 8 July 2026, and AMP Bank distributor home loan policies |
| $5,000 | Allowance for costs above 80% LVR in one reviewed policy, beyond which that policy permits no cash out, equity release or debt consolidation | Macquarie Bank residential home loans credit guidelines version 14.0, 8 July 2026 |
General information only. These are residential credit-policy settings at two lenders, not legislative limits, commercial-property rules or market-wide caps, and they are subject to change without notice.
Neither published policy reviewed for this page specifies a universal rule about whether every creditor is paid directly by the incoming lender or whether some funds can be released to the borrower. That mechanism matters because it decides who is responsible for the final payout and closure. Ask before signing the loan documents and make sure the settlement instructions show where the money is meant to go.
Can you use personally owned property to refinance company or trust debt?
Sometimes, but not automatically. If a company or trust owes the liability while the residential property is owned personally, the lender is assessing a business-purpose transaction across different legal entities. The file needs to show who owes the debt, who owns the security, your relationship to the company or trust, any personal guarantee already in place, what security is being discharged and what borrower, guarantor or security-provider structure the incoming lender will accept.
Owning enough equity personally does not by itself make company or trust debt acceptable. The lender still has to accept the purpose, the entity structure and the resulting servicing position. The two residential policies reviewed for this page do not create a market-wide rule for every cross-entity structure, so confirm the proposed structure before applying and take legal or tax advice where the transaction changes who owes or secures the debt. For the security side of the problem, read how lenders treat property held in a trust or company as security.
Is the loan regulated credit if it pays out business debt?
The test is the predominant purpose of the credit, not the security behind it or the name on the title. ASIC states that the National Credit Code applies where credit is provided wholly or predominantly for "personal, domestic or household purposes, or to purchase, renovate or improve residential property for investment purposes, or to refinance credit previously provided for this purpose". The second and third limbs are the ones people forget, and on a refinance they catch a great deal more than the phrase "consumer loan" suggests.
The word doing the work is "predominantly", and ASIC puts a number on it: "'Predominantly' means more than a 50% consumer component". So a refinance that pays out a mix of business and personal balances is not classified by which debt feels more important to you. It is classified by where more than half of the credit is going. Both statements were read on 3 September 2026, and they describe the perimeter of the legislation rather than the outcome on any particular file.
What follows from the test is worth stating once, neutrally, because it is a fact about your position rather than a warning or a selling point. If the credit is not regulated by the National Credit Code, the protections in that Code do not apply to it. That is the whole of the consequence, and it cuts both ways depending on what you value.
This page does not go further than the perimeter, and deliberately so. Where a loan sits on that line is a question of fact about your circumstances and your intended use of the money, and it belongs with your solicitor and your accountant rather than with a web page. How lender exposure is split is a related structural question once more than one facility is involved.
Can you clear ATO debt in the refinance?
At some lenders yes, and at others tax debt is an expressly unacceptable purpose, which is not what the rest of the Australian web will tell you. One of the published policies read for this page lists tax debt among its unacceptable loan purposes outright, in terms, while other lenders will fund a payout of an ATO balance as part of a refinance. The near universal "yes" you will find on this question is true at some lenders and expressly wrong at others, and the only way to know which you are dealing with is to ask before the application goes in rather than after.
The second thing worth getting right is the reporting threshold, because the figure in circulation is often an order of magnitude out. The ATO may report a business tax debt to a credit reporting bureau only where all of the following are true: the business has an Australian business number and is not an excluded entity; it has one or more tax debts of which at least $100,000 is overdue by more than 90 days; it is not engaging with the ATO to manage the debt; and it has no active complaint with the Tax Ombudsman about the ATO's intent to report. Where the ATO issues written notice, the business has 28 days to act. Read 3 September 2026 on the ATO's own page, and the criteria are cumulative, so failing to meet any one of them takes you outside reporting.
What does engaging with the ATO actually mean?
It means any one of six things, not just a payment plan, and it is the limb that decides most real files. The ATO states that if you are effectively engaging with it to manage the debt it will not report the debt even where the balance is $100,000 or more, and it lists effective engagement as any of: a payment plan you are complying with, an application for release from the tax debt, an active objection against a taxation decision the debt relates to, an active review with the Administrative Review Tribunal or an active appeal to the court, an active review of a reviewable decision affecting a non-complying super fund's debt, or an active complaint with the Tax Ombudsman about the debt. It also states it may decide not to report where a business is experiencing exceptional circumstances, and that reported information is removed when the business no longer meets the criteria, which happens when the debt is paid in full or the business effectively engages.
That is worth reading twice if you arrived here because the tax office is the whole problem. The action that stops the debt being reported is available today, costs no application, and does not put your property behind anything. A file being assessed right now is often better served by getting an arrangement in place than by rushing a payout, and rushing a payout at a lender that excludes tax debt as a purpose leaves you with a five-year enquiry and the same balance.
One tax point, stated once and no further. The ATO states that general interest charge incurred on or after 1 July 2025 cannot be claimed as a deduction, where charge incurred before that date could be. What that means for your return, and what the deductibility position is on interest in a refinanced loan, follows the use of the funds and is a question for your accountant. This page draws no conclusion on it. For the finance side, finance against ATO tax debt covers the lender picture in full, paying the ATO out at settlement is a separate mechanism, and the cost of carrying the ATO is worth understanding before you decide the payout is urgent.
How does a lender assess servicing on a consolidating refinance?
The lender assesses the new loan against the income available after every commitment that will remain after settlement. Consolidation can reduce monthly outgoings, but it does not make a liability disappear from an assessment until the old facility is actually paid out and dealt with under the lender's policy. Revolving limits and available credit can still matter even where the drawn balance is low.
Will consolidating business debt improve your borrowing power?
Sometimes, but not automatically. Paying out high-repayment facilities can reduce assessed commitments, while the larger mortgage balance can increase debt-to-income. A facility that is paid to zero but left available can also continue to weigh on a later assessment. Lower monthly cash outflow and better borrowing capacity are therefore related, but they are not the same thing.
| Item after settlement | What it can mean in the assessment |
|---|---|
| Debt being paid out and closed | The proposed payout can change the post-settlement commitments where the lender accepts the payout and has the evidence it requires |
| Credit card paid to $0 but left open | The available limit can still be treated as an ongoing commitment rather than as debt that has disappeared |
| Business overdraft left available | An unused or partly used limit can continue to affect assessment even where the drawn balance is low |
| Debt left outside the refinance | Its repayment remains part of the post-settlement position and has to be serviced alongside the new mortgage |
| Company debt with a personal guarantee | Do not assume it is ignored simply because the company is the named borrower; how it is treated is lender and structure specific |
| Larger new mortgage | Monthly cash flow can improve while the total mortgage balance and debt-to-income rise |
| Redraw or other available credit | Available credit can remain relevant, and APRA expects regulated institutions to consider the amount available for redraw on existing loan facilities |
Debt consolidation can improve cash flow without improving borrowing power by the same amount. A lender assesses the proposed post-settlement commitments and the larger new mortgage, not simply the number of repayments visible in the bank account.
For APRA-regulated banks, two current prudential settings matter directly to this question. APRA confirmed on 28 May 2026 that the mortgage serviceability buffer remains at 3 percentage points. The second setting is newer and is almost never mentioned on consolidation pages. On 27 November 2025 APRA activated a debt to income limit that had sat unused in its toolkit since 2022. From 1 February 2026 an authorised deposit-taking institution may write no more than 20 per cent of its new mortgage lending at a debt to income ratio of six times or higher, applied separately to its owner-occupier and investor portfolios and measured quarterly. APRA reaffirmed it unchanged on 28 May 2026. That matters here more than on an ordinary refinance. Adding your other debts to the mortgage raises the ratio the loan is measured on even where the monthly repayment falls, and APRA exempted only bridging loans for owner-occupiers and loans for the purchase or construction of new dwellings. A consolidating refinance is not on that list. Whether it bites on your file turns on where your lender sits inside its own quarterly bucket, which is not something a borrower can see. Both settings are prudential expectations of authorised deposit-taking institutions, so neither automatically describes how a non-bank or a private lender will assess the same file, and the qualifier is not a technicality on a page about consolidation. Third, and most often missed, APRA expects those institutions to apply interest rate buffers and floor rates "to both a borrower's new and existing debt commitments", and to make sufficient enquiries on the existing ones "including consideration of the current interest rate, remaining term, outstanding balance and amount available for redraw of the existing loan facility, as well as any evidence of delinquency". The redraw limb surprises people. An untouched redraw balance on an old facility can be treated as available credit, which is why closing what you do not use sits in the levers table above.
The income side runs on three pathways and this page names them rather than building them out. Full doc uses tax returns and financial statements. Alt doc substitutes business activity statements, an accountant's declaration or bank statements. Lease doc assesses against the rent the security produces rather than against you. Which one fits depends on how your business is documented, and full doc, alt doc and lease doc covers each in detail, with serviceability as the underlying concept.
What this section does not do is tell you how much you can borrow. That question needs your actual figures and an assessor, and any number produced without them is decoration. If your file already carries several facilities, a stacked debt file shows what the same arithmetic looks like when the stack is deep.
What does stretching short-term debt over a mortgage term cost you?
A lower rate over a longer term is not the same thing as less interest, and on the regulator's own numbers it usually costs more in total. Monthly repayments fall, which is often the real reason a consolidation is being considered, and the total cost of clearing the same debt rises because you are paying interest on it for far longer.
| Debt | Interest rate | Term | Total cost |
|---|---|---|---|
| $20,000 | 10% | 5 years | $25,496 |
| $20,000 | 8% | 10 years | $29,119 |
| $20,000 | 6% | 15 years | $30,379 |
ASIC Moneysmart, Debt consolidation and refinancing, page last updated 31 August 2026, read 3 September 2026. The regulator's own worked example: the interest rate may be lower, but the total paid in interest and fees over the longer term can be higher.
Should the consolidated debt sit in a separate loan split?
It can be a useful structure because it keeps the consolidated amount visible instead of letting it disappear inside the main mortgage balance. A separate split does not reduce the total debt, change the fact that the property secures it or guarantee a lower total cost. What it can do is make it easier to track the consolidated portion and set a deliberate repayment target rather than automatically carrying short-term debt for the full mortgage term. Ask whether the proposed lender can keep the consolidation portion separate and what the repayments would look like on the timeframe you actually want.
There is a second cost that does not appear in the table, and it is a change in kind rather than in amount. Debt that was unsecured becomes secured against your property. If the new loan is not paid, the home or the car put up as security can be sold by the lender to recover what was borrowed. That is the trade being made, stated once and without drama.
The regulator's other piece of guidance on this is the one most often skipped: close or reduce the old facilities rather than leaving them open with a zero balance. A consolidation that clears a stack without closing it is how the same stack rebuilds over the following two years, with the mortgage now larger underneath it, which is why the last section of this page is about the weeks after settlement rather than the day of it. Timing matters too, and when to consolidate and when to wait is a decision worth taking on its own terms. If it helps to see the same decision worked through by an operator rather than in the abstract, an operator working through the same decision covers it.
What happens if the refinance is declined?
A decline leaves two things behind: an enquiry on your credit file, and the debts exactly where they were. Neither is the disaster it can feel like on the day, and both are easier to plan around if you know what is actually recorded and for how long. The enquiry is created by the application itself, whatever the answer.
| Item | How long it stays | What creates it |
|---|---|---|
| Financial hardship information | 1 year | An arrangement made where repayments cannot be met |
| Repayment history information | 2 years | Whether each repayment was made on time |
| A default | 5 years | An unpaid amount reported after the required notices |
| A credit enquiry | 5 years | The application itself, whatever the outcome |
| A court judgment | 5 years | A judgment entered against you |
| A serious credit infringement | 7 years | Conduct a credit provider reports as such |
| A debt agreement | The later of 5 years from the day the agreement was made, or 2 years from the day it was terminated, ended or declared void | A formal agreement with creditors under the Bankruptcy Act 1966 |
| Bankruptcy | The later of 5 years from the day you became bankrupt, or 2 years from the day you were no longer bankrupt | A bankruptcy |
Office of the Australian Information Commissioner, What stays on a credit report, read 3 September 2026. Retention periods apply to consumer credit reporting and are the position at the date read. They describe what appears on a credit report, not how any particular lender will read it.
Is a hardship arrangement worse on your file than falling behind?
The two records are not equivalent in duration, and that is as far as this page will go. Financial hardship information stays for one year. A default stays for five. Repayment history information, which records whether each repayment was made on time, stays for two. What the retention periods do not say is which a lender reads worse, and no page can tell you that, because it is a credit policy judgement at each lender rather than a published rule.
The reason it matters here is timing. People frequently keep struggling on rather than ask, on the assumption that asking is the thing that marks the file. The durations above are the only hard fact available on that question, and they are worth having before the decision rather than after. If you are unsure whether your situation is a hardship conversation or a consolidation, the four rows near the top of this page are the quickest way to tell.
There is one point about hardship rights that is widely misunderstood, and both halves of it matter. The Australian Financial Complaints Authority states that small businesses do not have the same financial hardship rights as individuals. It also states that under the Banking Code of Practice a small business can still ask its firm for assistance with financial hardship. The first half on its own gives the wrong impression, which is why it is not stated on its own here. If you are unhappy with the firm's response, or you do not hear back from them at all, you can make a complaint to AFCA. AFCA also states that the request does not have to go through a formal process, and that any contact in which you ask for assistance can count. Both statements read 3 September 2026.
Can you consolidate only some of the debts?
Yes, a partial consolidation can be the cleaner answer where one debt is excluded, the full stack would cross an LVR cliff or refinancing the whole first mortgage is uneconomic. The new loan can be sized around the debts that the lender will accept, with the remainder left under its existing arrangement or dealt with separately. The trade-off is that you may still have more than one repayment, so compare the whole cash-flow result, fees and security position rather than treating one repayment as the goal in itself.
What are the alternatives if the full refinance is not available?
The question changes from how much to what structure, and the honest ordering puts the cheap moves before the expensive ones. Fix the purpose, try a lender whose policy reads differently on that one line, reduce the size of the consolidation, work the non-credit levers, and only then look at the structures below. Each of them ordinarily costs more than a first mortgage refinance, and this page routes rather than compares because the cost comparison is done properly elsewhere.
| Structure | The question it answers | Where to read the detail |
|---|---|---|
| Full refinance | Can one new facility replace the existing mortgage and clear the accepted debts | This page |
| Partial consolidation | Can the accepted debts be cleared without forcing an excluded debt or an LVR problem into the application | The section immediately above |
| Top-up or loan increase with the existing lender | Can extra borrowing be added without replacing the whole first mortgage | The equity release refinance guide |
| Second mortgage | Can new borrowing sit behind the existing first mortgage so the first mortgage stays in place | The second mortgage guide |
| Caveat loan | Is this a short-term business-purpose need with a defined exit | The caveat loans guide |
| Private lending | Is the file outside mainstream policy for a reason that needs a specialist short-term structure | The private lending guide |
| No new secured loan | Is there too little usable equity or is the underlying cash-flow problem not temporary | Return to hardship, ATO engagement and free debt-support options before adding another property-secured facility |
Reading further from here: a second mortgage against refinancing the first loan is the comparison worth making before you choose between them, how many credit enquiries is too many matters if you are considering applying again, and when the payout figure exceeds the value is the scenario to understand first if the property has moved against you.
From our broking, indicative
What follows is qualitative. On a page whose readers include people already behind on repayments, figures from experience read as a promise, so there are none here. In rough order of how often we see them, this is what stops a consolidating refinance:
- The purpose. One line in the stack is excluded at that lender, and the whole request stops with it rather than shrinking. Tax debt and clearing arrears are the two that do it most often.
- Where the loan lands after the debts are added, rather than where it sits today. Files fail on the far side of a policy line they were comfortably inside before the consolidation.
- Existing commitments assessed at their limits and with the buffer applied, including facilities the borrower thinks of as already dealt with because a payout is intended.
- Conduct on the existing facilities, which is read from the statements rather than from the explanation offered with them.
- The unsecured ceiling, which quietly caps the stack a long way below what the equity would allow.
What separates a file that moves from one that stalls is rarely the strength of the borrower. It is whether the purpose, the resulting position and the conduct on the existing facilities were checked against that lender's policy before the application went in, rather than discovered inside the assessment. The most common misjudgement of the order of operations is the same one every time: working out how much could be released first, and only then asking whether the debts in question can be paid out at all. That order is backwards, and it is the reason a decline can arrive on a file with plenty of equity in it.
Indicative only, drawn from files we have placed, as at September 2026. Not a quote and not an offer, and not a statement about the likelihood of any outcome on your file. Actual outcomes depend on lender policy and your circumstances at the time of application. Not financial advice.
What should you check after settlement to make sure the consolidation is actually finished?
Settlement is not the end of a consolidation. The next questions are whether each old account is actually closed, whether every security registration has been released and whether the money went where the settlement statement said it would. A facility can be at zero and still remain open, and a business security can remain registered after the debt has been repaid if the discharge is not completed.
| What to do | Why it matters | What to get in writing |
|---|---|---|
| Confirm each facility is closed, not just at zero | A facility paid to zero and left open is assessed at its limit on the next application, and an available limit is how the stack rebuilds | Written confirmation of closure from each provider, kept with the settlement statement |
| Confirm the securities behind the cleared facilities are released | Secured facilities carry registrations that do not lift simply because the balance was paid. PPSR guidance is that a secured party should discharge a registration within five business days of the debt it secures being repaid, and a registration left in place can affect your ability to obtain finance or sell the asset | Evidence that each registration has been discharged. Where it has not been, the next step is a written amendment demand to the secured party, and if it is still not discharged you can ask the Registrar to remove it or apply to a court |
| Check the funds went where the settlement statement said | Neither published policy read for this page specifies whether creditors are paid directly or funds are released to you, so the follow-through may be yours | The settlement statement itself, and a receipt or zero balance confirmation from each creditor |
| Check whether any redraw or available limit has been left in place | An untouched redraw balance can be treated as available credit in a later assessment, which is a prudential expectation on the assessing institution rather than an oversight | The new loan's terms showing what redraw is available, and your instruction if you want it reduced |
One further point, and it is the reason this section exists rather than a closing line. If the stack rebuilds and a second consolidation is needed in two years, the equity that made the first one possible has already been spent, and the loan to value ratio that comfortably cleared the policy line the first time may not clear it again. The first consolidation is usually the one that has the room in it. Treat the closures as part of the transaction rather than as tidying up afterwards.
A business debt consolidation refinance is decided by three questions in sequence. Will this lender fund each debt or payout purpose? Where will the larger loan sit against the residential property value after the accepted debts and costs are added? And will the resulting loan service once the commitments that remain are loaded? If the full refinance fails, the next answer may be a partial consolidation, a top-up, preserving the first mortgage with a second mortgage, or no new secured loan at all. The right structure depends on why the first structure failed.
Key takeaway: purpose first, equity second, servicing third. Then confirm the old facilities are actually closed and their securities released after settlement.Frequently Asked Questions
Sometimes. A business owner can use a refinance against an owner-occupied home or residential investment property to clear selected business debts where the lender accepts the purpose, the new balance sits inside its LVR and cash-out policy, and the resulting loan services. The lender-policy figures in this guide are residential policy only and should not be carried across to commercial-property lending.
Against a property you already own, the ordinary route is to refinance the existing mortgage to a larger amount so the extra pays the other balances out on the day it settles. The working sequence is purpose first, then equity, then servicing: check which of your debts that lender will actually fund, calculate where the loan lands as a percentage of the property value once those debts are added, then test whether the new repayment fits with every remaining commitment loaded with a buffer.
You do not always have to replace the whole first mortgage. A top-up with the existing lender, a separate split, or a second mortgage behind the existing loan can each achieve part of the same result, and which fits depends on your break costs, your current rate and whether the existing lender will fund the purpose at all. Both published policies read on 3 September 2026 cap the accumulated unsecured portion at $50,000, and one permits no consolidation above 80% of the property value beyond a $5,000 allowance for costs.
It lowers the monthly repayment, it usually raises the total cost, and where the security is a property you own it converts unsecured business debt into debt secured against that property. ASIC Moneysmart's position is that consolidation is worth doing where you pay less overall, the new term is not longer than your current debts, you can afford the repayment, and you close or reduce the old credit rather than leaving it available. Where some of those are not true, it can make the situation worse rather than better.
There is also a prior question specific to a business stack that the consumer version never has to ask. If one of the debts you most want cleared is a purpose the lender will not fund, tax debt at some lenders or clearing arrears at most, it is not a consolidation question at all yet. Check that before anything about equity, because that is the order in which files actually fail.
There is no single Australian cash-out rule or market-wide cap. The limits sit in each lender's credit policy. In the two published residential policies reviewed for this guide on 3 September 2026, one allowed equity release and cash out up to 80% LVR and then permitted no cash out, equity release or debt consolidation above that line apart from a $5,000 allowance for costs. The other allowed cash out up to 90% LVR subject to its conditions and evidence rules. These are lender policies, not legislative limits, and they can change.
In the two published residential policies reviewed for this guide on 3 September 2026, both capped accumulated unsecured debt at $50,000 and one also limited the total to five debts. That is not an Australian legal limit or a market rule. The lender also applies its LVR, purpose and servicing rules, so having enough property equity does not by itself mean the full unsecured balance can be rolled in.
At some lenders yes, and at others no. One of the two published residential policies reviewed for this guide expressly lists tax debt as an unacceptable purpose, while the other does not list it among its acceptable purposes. The practical answer is therefore lender-specific: confirm the ATO payout purpose before an application is lodged rather than discovering the exclusion after a credit enquiry has been created.
Not automatically through credit reporting. The ATO can disclose a business tax debt to a credit reporting bureau only where all of its reporting criteria are met, including at least $100,000 overdue by more than 90 days and the business not effectively engaging with the ATO to manage the debt. A complying payment plan is one form of effective engagement, not the only one. Separately, a lender may still see the liability in financial statements, bank statements or other application evidence.
Do not assume a consolidation application is the first move. One of the two published policies reviewed for this guide names meeting repayments on existing commitments as an unacceptable cash-out purpose, and arrears can also be visible in account conduct. If you are already behind, ask the lenders you have about hardship assistance first and work out whether the problem is temporary cash flow, an excluded purpose or a broader debt problem before lodging another application.
The refinance application itself creates a credit enquiry, and the Office of the Australian Information Commissioner says a credit enquiry can remain on a consumer credit report for five years. The same retention table lists repayment history information for two years, financial hardship information for one year and a default for five years. This is why it is worth checking purpose and likely structure before making repeated applications.
Harder than an ordinary refinance, because three tests apply rather than two. An ordinary refinance is judged on the loan to value ratio and on servicing. A cash out refinance adds a purpose test on the use of the funds, and that third test is the one that most often stops a file with plenty of equity in it.
On the servicing side two APRA settings apply. The mortgage serviceability buffer remains at 3 percentage points, and a debt to income limit activated on 27 November 2025 and effective from 1 February 2026 allows an authorised deposit-taking institution to write no more than 20 per cent of its new mortgage lending at a debt to income ratio of six times or higher, separately for owner-occupier and investor portfolios and measured quarterly. Adding your other debts to the mortgage raises the ratio the loan is measured on even where the monthly repayment falls, and a consolidating refinance is not among the exemptions APRA granted. Both settings bind authorised deposit-taking institutions and do not automatically describe how a non-bank or private lender assesses the same file.
There is no reliable market-wide Australian timeframe because the critical path changes with the file. The process can involve valuation, lender assessment, evidence for each payout purpose, payout figures, discharge authorities, loan documents and settlement across several creditors. A file with one clean payout is different from a file with tax debt, arrears, several securities or multiple entities. Ask for a file-specific critical path rather than relying on a generic number of days or weeks.
It lowers the monthly repayment and it usually raises the total cost, and it changes unsecured debt into debt secured against your property. ASIC Moneysmart's own worked example, read 3 September 2026, shows the same $20,000 debt costing $25,496 at 10% over five years, $29,119 at 8% over ten years and $30,379 at 6% over fifteen. Moneysmart also warns that if the new loan is not paid off, the home or car put up as security may be at risk and the lender can sell it to recover the money borrowed.
Whether that trade is worth making depends on your cashflow and on whether the old facilities are actually closed rather than left at a zero balance, because a facility left open is assessed at its limit on the next application and is how the same stack rebuilds with a larger mortgage underneath it.
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