Cash-out refinancing can help homeowners who want to consolidate high-interest, nondeductible debt. Because your mortgage interest rate is likely to be lower than rates on credit cards or other types of bank loans, consolidating debt may reduce your overall monthly debt payments. In addition, your mortgage interest may be tax-deductible, while your credit card interest is not.
The amount you save on loan consolidation may vary by loan. Since a home loan may have a longer term than some of the bills you may be consolidating, you may not realize savings over the entire term of your new loan. In addition, your loan may require you to incur premiums for hazard and, if applicable, flood insurance and mortgage insurance which would affect your monthly payment reduction. Federally Guaranteed Student Loans should not be consolidated because you will lose important federal benefits.