If you're carrying $20,000 in credit card debt at 21% interest, your monthly interest cost alone is roughly $350. By refinancing that debt into your mortgage at 5% interest, that same debt costs you only about $80 per month in interest.
The Pros of Debt Consolidation
- Improved Cash Flow: Your monthly payments can drop by hundreds or even thousands of dollars.
- Single Payment: Simplify your life with one monthly obligation.
- Credit Score Boost: Paying off revolving credit (cards) with installment debt (mortgage) often improves your credit utilization ratio.
The Risks to Watch For
The biggest risk is "re-loading." If you clear your credit cards but don't change the spending habits that created the debt, you may find yourself with a larger mortgage AND new credit card debt in a few years. Refinancing should always be paired with a solid budget plan.