If you have multiple debts, you may have considered consolidating that debt to make it easier to manage. An often-overlooked way to consolidate debt is through your mortgage, also known as a debt consolidation refinance. This method puts the equity in your home to work paying off your high-interest debts and consolidates that debt into one monthly payment, typically with a significantly lower interest rate compared to revolving loans, such as credit cards.

What are the benefits of a debt consolidation refinance?

1. Lower monthly payments: By consolidating high-interest debt into a single loan with a lower interest rate, you can typically reduce your monthly payments.
2. Simplified finances: Instead of managing several payments to different lenders each month, a debt consolidation refinance allows you to make one payment to one lender, making it easier to keep track of your finances and avoid late or missed payments.
3. Potential to save money: By consolidating your debt at a lower interest rate, you can potentially save money on interest charges over the life of the loan and pay off your debt faster. Mortgage interest is potentially tax-deductible too.^*
4. Improved credit score: Making on-time payments and reducing the total amount you owe can have a positive impact on your credit score over time.

Is a debt consolidation refinance right for you?

When deciding about debt consolidation refinance, the first step is to calculate the total amount of interest you’d pay with a refinance and compare it to the total amount you would pay with your existing high-interest debts. If you’re currently making minimum payments on a credit card with a high balance, you might be looking at decades of repayment — much of that in interest. Quite often, debt consolidation refinances provide significant savings.

Alexis Loaiza, our Real Estate Regional Sales Manager, regularly discusses the pros and cons of debt consolidation refinances with members to help them determine what’s right for them. He advises, “Beyond the potential to save money, one of the most important and often-overlooked benefits of consolidating debt with your mortgage is the reduction of stress associated with managing multiple debts and due dates.” Loaiza emphasizes the importance of considering your own personal financial goals and spending habits before making the decision to consolidate debt. “To be effective as part of an overall debt reduction strategy, debt consolidation refinances need to be paired with a debt-reduction mindset and fiscal discipline on the part of the homeowner, specifically when it comes to revolving credit.” Basically, you don’t want to use your home’s equity to pay off high-interest credit card debt if there’s any risk you could get back into a cycle of credit card usage. So before consolidating debt, ask yourself if you’re ready to commit to a long-term, debt-reduction strategy.

If you’ve got equity in your home and high-interest debt that you want to consolidate, you might benefit from a debt consolidation refinance. Not sure? We’re here to help our members make well-informed financial decisions, and our Real Estate Loan Officers can help you run the numbers and talk through your options. To find out more, talk to us today!

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Subject to credit approval. ^*For specific tax advice, please consult a qualified tax professional.
Grow Financial mortgage loans are valid for the purchase of refinance of owner-occupied residential properties in the states of Florida, South Carolina, North Carolina, Georgia and Tennessee including single-family detached, condominiums and townhomes. Not valid for the purchase of investment properties. Grow Financial mortgage loan rates are updated daily and available at growfinancial.org.

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