Debbie is carrying $40,000 in various forms of debt – a personal loan, credit cards and a car loan. The interest rates on these loans are all quite high, so she’s paying over $1,000 a month in interest alone, but not really making much progress on paying off the principal balances. 

Debbie also owns a house that she bought for $500,000 5 years ago with a 30-year fixed-rate mortgage, and the property is now worth $700,000. At the time of purchase, she put 20% down and currently owes $350,000 on it. Therefore, the total equity in her home is $350,000. This is more than enough money to pay off her debt.  

If Debbie takes out a new mortgage even for as much as $450,000 (which will easily cover the closing costs of her refinance), this will more than pay off her debts, and at a fixed rate of 2.0%, her monthly payments will be $1906.00. 

Before her refinance and debt consolidation she was paying more than half of this amount towards interest alone!