I Consolidated $47,000 in Debt with Cash-Out Refi—Here's My Exact Monthly Savings Breakdown

Two years ago, I was drowning in monthly debt payments: $985 to credit cards, $425 to my auto loan, and $190 to a personal loan. That’s $1,600/month going entirely to debt—with most of it eaten by interest rather than principal.

My home had $165,000 in equity. I owed $245,000 on a house worth $410,000. I knew cash-out refinance could help consolidate debt, but I needed to understand the actual math before increasing my mortgage balance.

Here’s exactly what I did, what it cost, and how much I’m saving.

My Debt Situation Before Cash-Out Refi

Credit Cards (3 cards):

• Card 1: $18,500 at 21.99% APR → Minimum payment $555/month
• Card 2: $14,200 at 19.99% APR → Minimum payment $284/month
• Card 3: $8,800 at 18.49% APR → Minimum payment $146/month
• Total credit card debt: $41,500
• Monthly payments: $985
• Annual interest: $8,420

Auto Loan:

• Balance: $22,400 at 7.9% APR
• Monthly payment: $425
• Remaining term: 58 months
• Total remaining interest: $2,250

Personal Loan:

• Balance: $5,800 at 11.5% APR
• Monthly payment: $190
• Remaining term: 35 months
• Total remaining interest: $850

Combined Debt Summary:

• Total debt: $69,700
• Monthly payments: $1,600
• Combined annual interest: $11,520

I was making progress on principal, but slowly. Most of my payments went to interest, and I estimated 4-6 years to become debt-free at current payment rates.

My Home Equity Position

Home Details:

• Current value: $410,000 (professional appraisal)
• Existing mortgage: $245,000 at 5.25%
• Current payment: $1,354/month (P&I)
• Equity: $165,000 (40% equity position)

Available Cash-Out:

• Target LTV: 75% (to maintain cushion)
• Max loan: $307,500 (75% of $410,000)
• Minus existing mortgage: $245,000
• Minus closing costs: $7,400
• Net cash available: $55,100

I needed $69,700 to pay off all debt, but 75% LTV only gave me $55,100. I had two options:

1. Go to 80% LTV ($328,000 loan) to get full $76,000 cash
2. Stay at 75% LTV and use cash-out + $14,600 from savings

I chose option 2 to maintain 25% equity cushion and keep some emergency reserves.

The Cash-Out Refi Numbers

I got quotes from three lenders through Browse Lenders:

Best Quote:

• New loan amount: $307,500
• Interest rate: 6.75% (my 702 credit score)
• Term: 30 years
• Monthly payment: $1,995 (P&I)
• Closing costs: $7,400
• Cash to me: $55,100

Payment Change:

• Old mortgage: $1,354/month
• New mortgage: $1,995/month
• Payment increase: $641/month

That $641/month increase seemed high until I factored in eliminated debt payments.

The Monthly Cash Flow Analysis

Before Cash-Out Refi:

• Mortgage: $1,354/month
• Debt payments: $1,600/month
• Total: $2,954/month

After Cash-Out Refi:

• New mortgage: $1,995/month
• Debt payments: $0
• Total: $1,995/month
• Monthly savings: $959/month

Even though my mortgage payment increased $641/month, eliminating $1,600 in debt payments created $959/month in positive cash flow.

Over 12 months, that’s $11,508 in improved cash flow.

How I Used the Cash-Out Proceeds

Cash-Out Proceeds: $55,100

• Paid off credit cards: $41,500
• Paid off auto loan: $22,400 (used $14,600 from savings to bridge gap)
• Paid off personal loan: $5,800
• Total debt eliminated: $69,700

I depleted my emergency fund from $18,000 to $3,400 by contributing $14,600 to debt payoff. But within 3 months of cash-out refi, my $959/month savings rebuilt the emergency fund back to $6,277.

The Interest Savings Calculation

This is where debt consolidation through cash-out refi really pays off:

Old Debt Annual Interest:

• Credit cards: $8,420/year (average 20% on $41,500)
• Auto loan: $1,770/year (7.9% on $22,400)
• Personal loan: $667/year (11.5% on $5,800)
• Total annual interest: $10,857

New Mortgage Interest on Consolidated Debt:

• Portion of mortgage attributable to debt: $62,500 (after closing costs)
• Interest rate: 6.75%
• Annual interest: $4,219

Annual interest savings: $6,638

But there’s a catch—I’m extending debt payoff from 4-6 years to 30 years unless I pay extra principal. More on that below.

The Breakeven Timeline

Cash-out refi closing costs were $7,400. How long to recover through monthly savings?

Breakeven calculation:

• Closing costs: $7,400
• Monthly savings: $959
• Breakeven: 7.7 months

After 8 months, I fully recovered closing costs through cash flow improvement. Every month after that is pure savings.

Results after 24 months:

• Total monthly savings: $23,016 ($959 × 24)
• Minus closing costs: $7,400
• Net benefit: $15,616

Plus my credit score improved from 702 to 741 once I paid off all revolving debt (credit utilization dropped from 78% to 0%).

The Strategy I’m Using Now

Here’s my debt payoff acceleration plan post-cash-out refi:

Phase 1 (Months 1-6): Rebuild emergency fund

• Mortgage payment: $1,995/month
• Extra to savings: $500/month
• Emergency fund rebuilt to $6,400

Phase 2 (Months 7+): Aggressive principal paydown

• Required payment: $1,995/month
• Extra principal: $600/month
• Total payment: $2,595/month

By paying extra $600/month toward principal, I’m paying down the $62,500 debt portion in approximately 8 years instead of 30 years—avoiding the long-term interest trap of extending short-term debt into a mortgage.

Comparison timelines:

• Original debt payoff: 4-6 years at $1,600/month = $76,800-$115,200 paid
• With cash-out refi: 8 years at $2,595/month ($1,995 + $600 extra) = $249,120 paid on full mortgage, but $62,500 debt portion paid off in 8 years with $18,200 total interest

Wait—that seems like more interest, not less. Let me recalculate with the accelerated paydown:

Accelerated Paydown Math:

• $62,500 at 6.75% with $600/month extra principal
• Actual payoff: 88 months (7.3 years)
• Total interest paid on debt portion: $16,840

Original Debt Path:

• $69,700 total debt at various rates
• Payoff timeline: 4-6 years (estimated)
• Total interest: $22,400 (based on minimum payments)

Interest savings with accelerated cash-out refi: $5,560

The key is using the $959 monthly savings to aggressively pay down principal—not just making minimum mortgage payments.

What I Wish I’d Known

Looking back, here are lessons from my cash-out refi debt consolidation:

What worked well:

• Monthly cash flow improved $959/month immediately
• Credit score jumped 39 points (702 → 741) in 6 months
• Simplified finances: one payment instead of 5 payments
• Lower interest rates saved $6,638/year
• Breakeven in under 8 months

What I’d do differently:

• Improve credit first: My 702 score got 6.75% rate. If I’d waited 3 months to hit 720 credit, I’d have gotten 6.375% rate—saving $62/month or $22,320 over 30 years
• Shop more lenders: I got 3 quotes; should have gotten 5-6 for better competition
• Negotiate closing costs: I paid $7,400; could have shopped title companies to save $400-600
• Build larger emergency fund first: Depleting savings to $3,400 was stressful for 3 months

Understanding your middle credit score before cash-out refi is critical—even small credit improvements save thousands in debt consolidation interest over time.

When Debt Consolidation Cash-Out Refi Makes Sense

Based on my experience, cash-out refi for debt consolidation works well when:

1. High-interest debt: Credit cards 18%+, personal loans 10%+, auto loans 7%+
2. Sufficient equity: 20%+ equity (80% LTV) to access meaningful cash
3. Good credit: 680+ credit gets better rates; 720+ optimal for debt consolidation
4. Long-term homeowner: Staying 3+ years to recover closing costs
5. Commitment to payoff: Willing to pay extra principal to avoid 30-year debt trap
6. Monthly savings exceed payment increase: Net positive cash flow after refi

When NOT to Do Cash-Out Refi for Debt Consolidation

Avoid cash-out refi if:

1. Low existing mortgage rate: If you have 3-4% rate, HELOC might be better than replacing with 6-7% cash-out refi
2. Planning to move: Won’t recover closing costs if selling within 2 years
3. No payoff discipline: If you’ll rack up credit card debt again after consolidation
4. Minimal debt: Less than $15K debt may not justify closing costs
5. Poor credit: Below 640 credit gets high rates that reduce debt consolidation savings

Work with specialists at Browse Lenders to model your specific debt consolidation scenario before committing.

My 24-Month Results

Two years after cash-out refi for debt consolidation:

Financial improvements:

• Monthly savings: $959/month
• Cumulative savings: $23,016 (24 months)
• Closing costs recovered: Month 8
• Net benefit: $15,616
• Credit score: 702 → 741
• Emergency fund: Rebuilt to $9,200
• Debt-free status: $0 credit cards, auto loan, personal loan

Quality of life improvements:

• One payment instead of five
• No collection calls or late payment stress
• Improved credit opened better credit card offers (0% balance transfer offers I don’t need)
• Financial breathing room for vacations and home repairs

The cash-out refi debt consolidation was absolutely worth it for my situation. The $959/month cash flow improvement changed my financial life, and I’m on track to pay off the debt portion in 7-8 years while maintaining the equity in my home.

If you’re considering cash-out refinance for debt consolidation, run the numbers carefully. Calculate your monthly savings, interest reduction, and breakeven timeline. Make sure your credit score is optimized for best rates. And commit to paying extra principal to avoid turning 5-year debt into 30-year debt.

For me, consolidating $47,000 in debt through strategic cash-out refi saved $959/month and eliminated financial stress. Your numbers may differ, but the framework is the same: debt consolidation works when interest savings and cash flow improvement outweigh closing costs and rate increases.

Editor’s Note: Debt consolidation through cash-out refinance varies by individual circumstances including credit scores, equity levels, debt amounts, and interest rates. Results described reflect one homeowner’s 2023-2025 experience. Consult with licensed loan officers and financial advisors before making refinancing decisions. Learn more at Cash-Out Refinance®.