Debt Consolidation vs Mortgage Refinance — Which Saves More?
Debt consolidation and mortgage refinance both simplify your debts, but they work differently. Use these calculators to find out which saves you more money.
Debt Consolidation Calculator
Roll multiple high-rate debts into one lower-rate loan
What it measures: Annual and monthly interest savings when replacing multiple debts with a single consolidation loan at a new interest rate.
✓ Use when
- You carry multiple credit cards, personal loans, or student loans
- A personal loan or balance transfer card offers a lower rate
- You want to simplify into a single monthly payment
- You are not a homeowner or prefer not to tap home equity
✗ Limitations
- Consolidation loans are typically unsecured — rates may be higher than mortgage rates
- Extending the term can increase total interest even at a lower rate
- Does not use home equity as collateral
Refinance Calculator
Replace your existing mortgage with a new one at a better rate
What it measures: Monthly savings, break-even point in months, and lifetime interest saved when replacing your current mortgage with a new one.
✓ Use when
- Current mortgage rates are meaningfully below your existing rate
- You want to shorten or extend your loan term
- You want to cash out home equity to pay off high-rate debts
- You have significant home equity to leverage
✗ Limitations
- Requires closing costs typically 2–5% of loan amount
- Resets your amortization clock — early years are mostly interest
- Requires home equity and qualification
Key difference
Refinancing uses secured home equity and often achieves the lowest rates but comes with closing costs and resets your mortgage clock. Debt consolidation is faster and requires no home equity but rates are typically higher than mortgage rates.
Worked Example
Scenario
$15,000 in credit card debt at 21% APR and $8,000 personal loan at 14% APR. Option A: consolidate into a personal loan at 10%. Option B: cash-out refinance adding $23,000 to mortgage at 7%.
Debt Consolidation: saves ~$3,800/year in interest on the $23K at 10% vs blended 18.5%
Cash-out Refinance: saves ~$2,650/year in interest on the $23K at 7% — but adds closing costs of ~$2,000 and extends mortgage term
Interpretation
The consolidation loan saves more per year but at a higher rate than the refinance. The refinance wins long-term if you stay in the home — but only after you recover closing costs (typically 9–18 months).
Bottom line
If you own a home with equity and plan to stay long-term, a cash-out refinance often wins. If you rent or want to avoid closing costs, debt consolidation is faster and simpler.