Mortgage consolidation can help reduce costs and lower payments

Now is the perfect time to take a closer look at your financial situation and explore ways to reduce your borrowing costs.

If you're juggling high-interest credit card balances, car loans or personal loans, it can feel overwhelming to stay on top of multiple payments. Fortunately, if you’re a homeowner with sufficient equity in your property, consolidating your debt into your mortgage could be a smart move.

Five key benefits of debt consolidation

Lower interest costs – Refinancing your mortgage to consolidate high-interest debts can significantly reduce the amount of interest you pay over time. By securing a lower rate, you keep more money in your pocket.

Simplified payments – Instead of managing multiple due dates and varying interest rates, debt consolidation streamlines everything into one predictable monthly payment, making budgeting easier.

Improved cash flow – Reducing your overall monthly payment frees up funds for savings, investments, or other essential expenses, helping you regain control of your financial future.

Reduced stress – Late payments and mounting debt can be a major source of anxiety. Consolidation eliminates the hassle of multiple bills and helps you stay on track.

Potential credit score improvement – Making consistent, on-time payments is one of the best ways to boost your credit score. By consolidating debt into a structured payment plan, you can work toward better financial health.

Real-life example: How debt consolidation saved a homeowner $850 per month

A homeowner with a mortgage balance of $250,000 at 3.5% interest (25-year amortization) and carrying high-interest debt:

• Credit card debt: $25,000 at 19.99% interest

• Car loan: $30,000 at 8.5% interest (five-year term)

• Personal loan: $15,000 at 12.5% interest (five-year term)

Total monthly payments: $3,150

Refinancing the mortgage to consolidate debt

After reviewing their finances, we refinanced their mortgage to include their high-interest debts and the new mortgage amount was $320,000 ($250,000 existing mortgage plus $70,000 debt consolidation)

• New interest rate: 5% (current market rate)

• New amortization period: 25 years

• New monthly mortgage payment: $1,860

Savings Breakdown

Before consolidation, the total monthly payments were:

• Mortgage: $1,250

• Credit card: $500

• Car Loan: $615

• Personal loan: $785

Total: $3,150 per month

After refinancing, the new mortgage payment was $1,860, it lead to a monthly savings of $1,290. Even factoring in a potential increase in the mortgage rate from 3.5% to 5%, the homeowner was saving $850 per month.

Choosing the right debt consolidation strategy starts with understanding your options. If you’d like a personalized, confidential assessment of your financial situation, email [email protected] or schedule a call at calendly.com/april-dunn.

Let’s find the best path to financial peace of mind together.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.