The amount of debt solutions available these days seems almost limitless. If you are a home owner with equity in your property and have excessive personal debt, refinancing could be your best option. Interest rates have been low for years, but right now they are really low! Using a refinance as a means of debt consolidation can be extremely beneficial.

Picture this. You bought your home 10 years ago for $200,000 with a 7% interest rate and a 30 year note. Your monthly payments, not including your taxes and insurance, are $1,330.60. After ten years of making your monthly payments on time every month, your principal payoff balance on your mortgage should be at about $171,295. Over the years you have a couple of bumps and bruises (financial speaking) and maybe spent a little too much on some clothes or a vacation! As a result, you’ve amassed $20,000 in credit card debt. Your monthly minimums on the credit card debt should be around $400 per month (assuming a 2% minimum). Between your mortgage and your credit card debt, you are spending $1,730.60 a month.

Let’s assume that you qualified for a new 30 year loan at 5%. You were able to consolidate your credit card debt into your home loan along with your old principal loan. You’d now have a principal balance of $191,295, assuming that you didn’t role your closing costs into the loan. Your new monthly payments are $1,026.91, once again not including your taxes and insurance.

Now are you ready for the really cool part?! If you hadn’t refinanced, it would have taken you another 20 years to pay off your mortgage, and the credit card debt (depending on your interest rates) could have cost you upwards of $30,000 - $40,000 to pay off! Let’s assume that the $1,730.60 monthly payment was an affordable payment for you. If you were to pretend that you still had that for a monthly payment, and just put it towards your mortgage payment each month, your new 30 year loan would be paid off in 13 years and you would save tens of thousands of dollars! As you can see, when in the correct financial position, refinancing can be a terrific debt solution!