With the right market conditions, and enough equity to knock out a sizable portion of your high-interest credit card debt, you can benefit when you refinance your mortgage to pay off debt. Here are a few other good reasons to consider a re-fi: You could be paying off your credit card debt at a lower interest rate.

Does refinancing take longer to pay off?

Refinancing doesn’t reset the repayment term of your loan, but it does replace your current loan with a new loan. You may be able to choose from different offers for your new loan depending on your goals, including a longer or shorter repayment term.

How does a homeowner refinance to pay off debt?

Some homeowners refinance to pay off debt, such as credit card balances. They accomplish this with a cash-out refinance: getting a mortgage for more than they owe on the home, taking the difference in cash and paying off high-interest debt with it.

Is it bad to pay off credit card debt with cash out refinance?

If you’re doing a cash-out refinance to pay off credit card debt, you’re paying off unsecured debt with secured debt, a move that’s generally frowned upon because of the possibility of losing your home. New terms: Your new mortgage will have different terms from your original loan.

What happens to your credit when you refinance a mortgage?

When you take on a new mortgage loan to pay off your debt, you shorten the average age of your accounts, and a new inquiry is made on your credit report. Both factors can cause significant damage to your credit score.

How does a cash out mortgage refinance work?

Here’s how a cash-out refinance works: 1 Pays you part of the difference between the mortgage balance and the home’s value. 2 Has slightly higher interest rates due to a higher loan amount. 3 Limits cash-out amounts to 80% to 90% of your home’s equity.