What is a Debt Consolidation Mortgage Refinance?

Find out if you're getting ripped off on your car insurance in less than two minutes.
Find insurance savings (100% Free)
No long forms · No spam · No fees
App rating
Insurance Quotes
Happy users
Savings found every month
Why you can trust Jerry
Jerry partners with some of the companies we write about. However, our content is written and reviewed by an independent team of editors and licensed insurance agents, and never influenced by our partnerships. Learn more baout how we make money, review our editorial standards, reference out data methodology, or view a list of our partners
If you’re having trouble keeping up with payments on high-interest debts, you might be able to find some relief by consolidating them with a mortgage refinance. 
There are few worse feelings than trying to keep up with multiple debt payments, especially when high interest rates are keeping you from making headway on the actual principal balance of your loan(s).
One option that some people consider when facing this situation is a debt consolidation mortgage refinance, which, in a best-case scenario, can let you combine your debts into one monthly payment at a lower interest rate.
New to debt consolidation mortgage refinances? Jerry, the home and car insurance broker and comparison app, is here to break down what it is, when you should consider it, and how finding the right insurance can help you free up more space in your monthly budget.
Are you overpaying for car insurance?
Find Savings!
No long forms. No spam calls. Free Quotes.
4.7/5 App Store Rating, 8,100+ Reviews
Trusted by 1.5+ Million Customers.
rating primary

What is a debt consolidation mortgage?

A debt consolidation mortgage is when you refinance your mortgage to pay off multiple debts (including the home loan and other loans). It might also be referred to more generally as a debt consolidation refinance.
You will swap out your current mortgage loan for a new one (usually with a lower interest rate) to free up more money to pay off other high-interest debt, such as credit card debt. You may even be able to lump the other debt into the mortgage amount or use your home equity to pay off the other debt directly. 
This option is more viable the more equity you have built up in your home, so if you’re in the early stages of paying off your mortgage, a debt consolidation refinance probably isn’t the move for you.

Should you consolidate debt by refinancing your mortgage?

If you find yourself overwhelmed as you’re trying to juggle steep monthly payments, a debt consolidation refinance might seem like a tempting option. 
But when should you consolidate debt with a refinanced mortgage?
If you have a high mortgage interest rate, a refinance can lower your rates, making it easier to pay off both the mortgage and other debt you have. 
If you have enough equity in your home and the market conditions are favorable, you may be able to get rid of credit card or other debt rather quickly by refinancing your mortgage and reducing your monthly mortgage payment. 

How to get a debt consolidation refinance

Provided that you’ve made enough headway on the mortgage and have the needed equity in your home, you could refinance your mortgage to put more money toward that pesky high-interest debt. 
A first form of refinancing to consider is a cash-out refinance. Here’s how it works: 

Cash-out refinance

A cash-out refinance is commonly used by people for home improvements, investments, or sometimes paying off other debts. It involves taking out a loan to pay for your existing mortgage amount and a portion of your home’s equity. 
A portion of the funds from a cash-out refinance will go toward paying off your existing mortgage, and you can direct the rest of your cash toward your other debts.
After all is said and done, you’ll have a new mortgage with a higher balance that will represent all your consolidated debt. You’ll be able to make monthly payments in lump sums. 

Requirements for a cash-out refinance mortgage

In situations where you’ll be borrowing against your home’s equity, it’s recommended that you try to maintain at least 20% of your home’s value in equity. Many lenders won’t offer a cash-out refinance unless this is the case. 
For that reason, cash-out refinances aren’t often easy options for people who have just bought a home and have yet to build up much equity in their property. 
To qualify for a cash-out refinance, you’ll also need an adequate credit score—the minimum requirement will vary from lender to lender, but usually, you’ll typically need a score of 620 to 640or higher. You’ll need a minimum credit score of 500 for an FHA cash-out refinance.
The higher your credit score, the lower your interest rate will usually be.
You’ll additionally need an adequate debt-to-income ratio and proof of steady income

Other debt consolidation options that use home equity

The following are some additional options that allow you to consolidate your debt by taking advantage of your home’s equity. 

Home equity loan

Another option to consolidate debt using your home’s equity is by taking out a home equity loan. With a home equity loan, you won’t be refinancing your existing mortgage. Instead, you’ll be taking out a second mortgage on a separate portion of your home’s existing equity that you can use to consolidate some of your other debt.
With a home equity loan, it’s important to note that you’ll still have to pay your monthly mortgage payment in addition to your home equity loan payment.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) allows you to borrow against your home’s equity to cover other costs. You’ll be able to borrow up to a certain limit for a set amount of time, which will be followed by a repayment period.
Like a home equity loan, this won’t involve refinancing your mortgage and will involve a separate monthly payment.

Pros and cons of a debt consolidation refinance

Using a refinanced mortgage to consolidate your debt can be a real game-changer, but there are plenty of considerations to keep in mind before deciding whether it’s the right option for you. Take a look at some of the pros and cons that can come with a debt consolidation refinance.


  • Lower monthly payments: Most obviously, you’ll be creating more room in your monthly budget when you have a lower mortgage rate. 
  • Lower interest rates: Scoring a lower interest rate means more of your payments are actually going toward the loan itself, and you could end up paying less in interest over time.
  • Potential tax deductions: Mortgage interest paid can be tax-deductible under certain circumstances, which isn’t the case for all forms of debt.
  • It could help boost your credit score: While taking out a new loan can temporarily pull down your credit score, consolidating debt can often raise your score over time by giving you a lower credit utilization ratio and as you make on-time monthly payments.
  • Your new mortgage terms may work better for you: If the conditions of your potential new mortgage refinance are more forgiving than those for your other existing debts, a debt consolidation refinance may be the right choice.


  • Your house is your collateral: If you go this route, keeping your house hangs on you being able to make your refinanced mortgage payment, so make sure your monthly payment is one you can handle.
  • Closing costs and other fees: Refinancing your mortgage will also involve closing costs, so you’ll want to make sure you can pay for these before moving forward. You should also consider whether closing costs and any other fees will still be worth it when consolidating your debts. 
  • You might be tempted to take out more debt after getting used to a lower monthly payment, so it will be important to exercise self-discipline if you opt to consolidate your debt with a mortgage refinance to avoid putting yourself in a financially vulnerable position again.
  • You might have a longer loan term: The length of time it takes to pay off your mortgage might increase compared to the terms on some of the original loans you took out, which could mean you’ll have to deal with monthly payments longer and you may pay more in interest over time.
  • You’ll need a significant amount of equity: Because many lenders want to see that you still maintain a certain amount of equity in your home (often at least 20%), a debt consolidation refinance isn’t always an easy option for new homeowners who have only recently taken out a mortgage.

How to save on home and car insurance

If you’re looking to free up more room in your monthly budget, you could also consider revisiting your home and car insurance policies. If you’re wondering if you could be getting better coverage for a better rate, the Jerry app makes the insurance shopping process faster and easier than ever!
Once you’ve downloaded the app, you’ll enter some information, which takes under a minute. Then, Jerry will show you personalized quotes from some of the nation’s top insurance providers so you can compare your options in one spot.
Once you find the coverage you need at the lowest available rate, Jerry can even help you with setting up your new policy and canceling your old one. 
The average Jerry user enjoys a savings of $800+ per year on car insurance alone, and you could find additional savings when bundling with your home insurance policy!
Jerry was wonderful! I used it for my auto and renters policies. I trusted it so much that I signed up my homeowners insurance under Jerry as well. All of the agents are amazingly nice and knowledgeable.” —Mary Y.
Compare auto insurance policies
No spam or unwanted phone calls · No long forms · No fees, ever

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
Find insurance savings — it's 100% free