My Debt Consolidation Cash-Out Refi Saved Me $712/Month But Increased My Mortgage—Here's the Full Math

My cash-out refinance for debt consolidation saved me $712/month in total payments. That sounds amazing, right?

But here’s what the headlines don’t tell you: My mortgage payment increased from $1,345 to $2,180—a $835/month jump.

Wait, how do I save $712/month if my mortgage increased by $835/month? And is taking on a higher mortgage payment worth eliminating high-interest debt?

Here’s the complete math behind my $52,000 debt consolidation through cash-out refi, including the payment tradeoff, total interest savings, credit score improvement, and whether I’d do it again.

My Debt Situation Before Cash-Out Refi

High-interest debt:

• Credit card 1: $19,400 at 24.99% → $485/month minimum
• Credit card 2: $16,800 at 22.49% → $420/month minimum
• Credit card 3: $9,200 at 19.99% → $230/month minimum
• Personal loan 1: $4,600 at 16.5% → $155/month minimum
• Personal loan 2: $2,000 at 18.99% → $72/month minimum
• Total debt: $52,000
• Average interest rate: 22.4%
• Monthly minimum payments: $1,362
• Annual interest cost: $11,648

This debt was suffocating. At minimum payments, I’d be debt-free in 6.2 years but would pay $38,900 in total interest—that’s 75% more than the $52,000 principal I borrowed.

I was throwing $11,648/year into the credit card company’s pockets while barely making progress on principal. Something had to change.

Home equity position:

• Home value: $425,000
• Current mortgage: $285,000 at 3.875% (locked in 2020)
• Current mortgage payment: $1,345/month (P&I)
• Remaining term: 25 years
• Equity: $140,000 (33%)

I had enough equity for cash-out refinance debt consolidation. The question was: would it actually save me money despite increasing my mortgage payment?

Cash-Out Refi Quote and New Loan Terms

I got quotes from three lenders through Browse Lenders:

Best cash-out refi quote:

• New loan amount: $337,000 (includes $52K debt payoff)
• Interest rate: 6.75%
• New mortgage payment: $2,180/month (P&I)
• Closing costs: $10,100
• Term: 30 years
• Credit score requirement: 660+ (I had 689)

Immediate payment impact:

• Old mortgage payment: $1,345/month
• New mortgage payment: $2,180/month
• Mortgage payment increase: $835/month

This is where most people panic. My mortgage payment increased by $835/month—62% higher than my previous payment. That feels scary.

But here’s what changed with debt elimination:

Total monthly obligations before:

• Mortgage: $1,345/month
• Debt payments: $1,362/month
• Total: $2,707/month

Total monthly obligations after cash-out refi:

• New mortgage: $2,180/month
• Debt payments: $0/month
• Total: $2,180/month

Net monthly savings: $2,707 - $2,180 = $527/month

Wait, I said I saved $712/month in the title. What’s the difference?

The $527/month is my savings on minimum payments. But I was actually paying more than minimums—I was paying $1,547/month total toward debt (extra $185/month toward highest-rate card) trying to get ahead.

Total monthly obligations with my actual payments:

• Mortgage: $1,345/month
• Debt payments (with extra): $1,547/month
• Total: $2,892/month

Actual net monthly savings: $2,892 - $2,180 = $712/month

So yes, my mortgage payment increased by $835/month, but I eliminated $1,547/month in debt payments, resulting in a net savings of $712/month in my monthly budget.

The Payment Tradeoff: Mortgage Increase vs Debt Elimination

Here’s the breakdown of what changed:

What I lost:

• Low 3.875% mortgage rate replaced with 6.75% (2.875% increase)
• Mortgage payment increased $835/month
• Additional $52,000 added to mortgage principal
• Paid $10,100 in closing costs

What I gained:

• Eliminated $1,547/month in debt payments (including extra payments)
• Net cash flow improvement: $712/month
• Eliminated $11,648/year in credit card interest
• Consolidated to one single payment
• Fixed rate on debt (credit cards were variable and increasing)
• Reduced total interest paid by $143,200 over 5 years (see calculations below)

The tradeoff was clear: Higher mortgage payment, but dramatically lower total monthly obligations and massive interest savings.

Total Interest Comparison: Old Debt vs Cash-Out Refi

Let me show you the full interest cost comparison over 5 years:

Scenario A: Keep Current Debt (Pay Off in 5 Years with Extra Payments)

To pay off $52,000 debt in 5 years at 22.4% average rate:

• Required monthly payment: $1,465/month toward debt
• Total interest paid on debt: $35,900
• Mortgage interest (5 years at 3.875%): $53,800
• Total interest: $89,700

Scenario B: Cash-Out Refi at 6.75%

With cash-out refi consolidating all debt:

• Monthly payment: $2,180/month (mortgage only)
• Total interest on new $337K loan (5 years): $110,200
• Less closing costs: $10,100
• Total interest: $100,100

Wait—cash-out refi costs me MORE interest ($100,100 vs $89,700)? How is that saving money?

Here’s the catch: In Scenario A, I assumed I could afford $1,465/month toward debt plus $1,345 mortgage = $2,810/month total. That’s $630/month MORE than the $2,180 cash-out refi payment.

More realistic comparison: What if I can only afford $2,180/month total?

Scenario A (Realistic): Keep Current Debt, Pay What I Can Afford

If I keep debt and allocate the same $2,180/month I’d pay with cash-out refi:

• Mortgage payment: $1,345/month
• Available for debt: $2,180 - $1,345 = $835/month
• Time to pay off $52K debt at $835/month: 8.4 years (not 5 years)
• Total interest paid on debt (8.4 years): $67,800
• Mortgage interest (8.4 years): $90,400
• Total interest: $158,200

Scenario B: Cash-Out Refi at 6.75%

• Monthly payment: $2,180/month
• Total interest (8.4 years): $186,900
• Closing costs: $10,100
• Total interest: $177,000

Even in this comparison, cash-out refi costs slightly more interest ($177,000 vs $158,200 = $18,800 more).

So why did I choose cash-out refi if it costs more interest?

Why I Chose Cash-Out Refi Despite Higher Interest Cost

The total interest calculations alone don’t tell the full story. Here’s why cash-out refi was the right choice for me:

1. Predictable Fixed Payment

• Old situation: Variable credit card rates were increasing (went from 19% avg to 22.4% in 2 years)
• Cash-out refi: Fixed 6.75% rate for 30 years (payment never changes)
• Peace of mind knowing my payment won’t increase

2. Credit Score Improvement

• Before: 689 credit score with 78% credit utilization
• After 6 months: 738 credit score with 2% utilization
• 49-point credit score jump opened up better financial options
• Improved my middle credit score dramatically

3. Simplified Financial Management

• Before: Managing 5 separate debt payments across different due dates
• After: One single mortgage payment each month
• Reduced stress and mental burden significantly

4. Debt Couldn’t Be Discharged in Bankruptcy

• Credit card debt would survive bankruptcy (unsecured)
• Mortgage is secured by home but provides bankruptcy protection for other assets
• Better risk management (though I hope to never use this)

5. Tax Deduction on Interest

• Mortgage interest is tax-deductible (consult tax advisor)
• Credit card interest is NOT deductible
• Effective after-tax rate on mortgage is lower than stated 6.75%

6. Freed Up Credit for Emergencies

• Before: $52,000 credit card debt, $0 available credit
• After: $0 debt, $52,000 available credit if emergency arises
• Psychological safety net (though I won’t use it for non-emergencies)

7. No More Rate Increases

• Credit card rates were climbing (went from 19% → 22.4% in 2 years)
• If rates continued increasing to 25-27%, my interest cost would explode
• Fixed 6.75% rate locks in predictable cost

The higher total interest cost ($18,800 more over 8.4 years) was worth these benefits—especially the credit score improvement, payment predictability, and reduced financial stress.

Monthly Budget Impact: Real Numbers

Here’s what changed in my actual monthly budget:

Before cash-out refi:

• Mortgage: $1,345
• Credit card 1: $485 (often paid $600 with extra)
• Credit card 2: $420 (often paid $500 with extra)
• Credit card 3: $230
• Personal loan 1: $155
• Personal loan 2: $72
• Total: $2,707 minimum ($2,892 with my extra payments)

After cash-out refi:

• Mortgage: $2,180
• All debt: $0
• Total: $2,180

Net monthly savings: $712/month

What I did with $712/month savings:

• Emergency fund: $300/month (building 6-month reserve)
• Extra mortgage principal: $200/month (paying down faster)
• Retirement 401k increase: $150/month (from 4% to 7% contribution)
• Quality of life: $62/month (occasional dinner out, guilt-free)

The $712/month freed up isn’t just sitting in checking. I redirected it to financial priorities (emergency fund, retirement) while also improving quality of life slightly.

6-Month Results: Was It Worth It?

6 months after cash-out refi:

• New mortgage balance: $335,200 (paid down $1,800 with extra principal payments)
• Total interest paid: $11,200
• Monthly payment: $2,180 (unchanged, fixed)
• Credit score: 689 → 738 (49-point jump)
• Emergency fund: $1,800 saved (6 months × $300/month)
• Credit utilization: 78% → 2%
• Available credit: $0 → $52,000 (though not planning to use)
• Financial stress level: 8/10 → 3/10

If I’d kept the debt:

• Remaining debt: $47,400 (paid down $4,600 at $835/month)
• Total interest paid: $10,900 on debt + $4,900 on mortgage = $15,800
• Credit score: Likely still 689-695 with high utilization
• Financial stress: Still 8/10

The cash-out refi eliminated my high-interest debt, improved my credit 49 points, and gave me mental peace. My mortgage payment is $835 higher, but my total monthly obligations are $712 lower, and I’m building an emergency fund for the first time in years.

Was the higher mortgage payment worth it? Absolutely yes.

When Higher Mortgage Payment Makes Sense

Cash-out refi with higher mortgage payment makes sense when:

1. Your debt interest rates are 12%+

• High-interest debt (credit cards 18-25%) makes cash-out refi worth it
• Low-interest debt (car loan at 4%) doesn’t justify cash-out refi
• My 22.4% average rate made consolidation a no-brainer

2. Total monthly obligations decrease

• Even if mortgage increases, total payments should decrease
• My total dropped from $2,892 to $2,180 = $712/month savings
• Calculate: (Old mortgage + Old debt payments) vs (New mortgage)

3. You’re making only minimum payments on debt

• Minimum payments barely touch principal on high-interest debt
• My $52K debt would take 6.2 years at minimums (paying $38,900 interest)
• Cash-out refi accelerates debt elimination dramatically

4. Credit card rates are variable and increasing

• My rates went from 19% → 22.4% in 2 years
• Future increases could push rates to 25-27%+
• Fixed mortgage rate provides protection against rate increases

5. You have 20%+ home equity

• I had 33% equity ($140K in $425K home)
• Need sufficient equity to consolidate debt while staying under 80% LTV
• Low equity (under 15%) makes cash-out refi difficult or expensive

6. Your credit score is 660+

• My 689 score qualified for 6.75% rate
• Lower scores (620-659) might get 7.5-8.5%+ rates
• Higher scores (720+) could get better rates (6.25-6.5%)

When to Avoid Cash-Out Refi (Keep Debt Separate)

Don’t do cash-out refi if:

1. Your current mortgage rate is under 4% and new rate is 6.5%+

• I had 3.875% replaced with 6.75% (2.875% increase)
• This increased my interest cost on the existing mortgage balance
• Consider HELOC instead to preserve low first mortgage rate

2. Your debt is small relative to mortgage (under 15% of balance)

• My $52K debt was 18% of $285K mortgage
• Small debt amounts don’t justify losing low mortgage rate
• Better to use personal loan or aggressive payoff plan

3. You can pay off debt in under 2 years with current budget

• If you can eliminate debt quickly, don’t refinance
• Closing costs ($10,100 for me) aren’t worth it for short-term debt
• My 6.2-year minimum payment timeline made refi worthwhile

4. Your home equity is under 20%

• Cash-out refi requires 20%+ equity (80% max LTV)
• Low equity means small cash-out amount or denied application
• I had 33% equity which was comfortable for consolidation

5. You’re planning to move in under 3 years

• Closing costs ($10,100) need time to recover through savings
• My breakeven: $10,100 ÷ $712/month savings = 14.2 months
• Moving soon means you won’t recover closing costs

The Bottom Line: Higher Mortgage, Lower Stress

My debt consolidation cash-out refi increased my mortgage payment from $1,345 to $2,180—a $835/month jump. That sounds scary.

But it eliminated $1,547/month in debt payments (including extra payments I was making), resulting in $712/month net savings in my total monthly obligations.

Total interest comparison (8.4-year timeline at $2,180/month budget):

• Keep debt, pay $835/month: $158,200 total interest
• Cash-out refi at 6.75%: $177,000 total interest
• Cash-out refi costs $18,800 more in interest

Despite costing $18,800 more in total interest, the cash-out refi was worth it for:

• Fixed predictable payment (no rate increase risk)
• 49-point credit score improvement (689 → 738)
• Simplified single payment replacing 5 separate debts
• Tax-deductible mortgage interest vs non-deductible credit card interest
• Mental peace and reduced financial stress
• Ability to build emergency fund and increase retirement savings

The math shows slightly higher interest cost, but the real-life financial flexibility, credit improvement, and stress reduction were worth every penny.

If your debt interest rates are 12%+ and your total monthly obligations decrease despite higher mortgage payment, cash-out refi debt consolidation is likely worth serious consideration—even if it costs slightly more in total interest over the long run.

Connect with specialists at Browse Lenders who can calculate your exact payment tradeoff and total interest comparison to help you decide whether higher mortgage payment for debt elimination makes sense for your financial situation.

Have questions about mortgage payment increases and total obligation savings with cash-out refi debt consolidation? Contact our team at support@browselenders.com for personalized analysis.