Debt consolidation is the most common reason homeowners refinance, and the one where honest math matters most.
Run the interest comparison first
Add the annual interest you currently pay across cards and credit lines. Compare it to the interest on the same balance at your new mortgage rate. That difference is the gross benefit, before costs.
Subtract the cost of breaking
A fixed mortgage penalty is the greater of three months' interest or the interest rate differential. Add legal, appraisal and discharge costs. Divide by the monthly saving and you have your break-even in months. If it is longer than your remaining term, the answer is no.
Consider the alternatives honestly
A HELOC behind an existing low-rate mortgage can achieve the same result without a penalty. A second mortgage costs more but preserves a very low first mortgage. Sometimes an aggressive prepayment plan beats all three.
The part that is not arithmetic
Consolidation converts unsecured debt into debt secured by your home, over a longer period. It works when the spending pattern that created the balance has changed. When it has not, the balances rebuild alongside a larger mortgage.
Ask for the penalty figure, the break-even in months, and the total interest over the full amortisation. If a broker will not put all three in writing, keep asking.
Want this applied to your own numbers?
Call Phil Cragg at 866-349-4915 or request a written comparison.
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