How & why consolidate?
You’re probably hearing an awful lot about debt consolidation these days. Mortgage interest rates are low, so a lot of people are taking advantage. You can use the equity in your home to free up cash flow and pay off higher-interest debt, such as credit cards. An added bonus is that the interest could be tax deductible.

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Three ways to consolidate
Here are the three most common ways that people use the equity in their home to consolidate debt:

Home Equity Loan
Consider a home equity loan if you have equity in your home and your interest rate is already lower than rates being offered today. This is an additional loan that borrows against the equity in your home. If you have $40,000 equity in your home and you’d like to pay off $10,000 in high interest credit card debt, you simply take out a $10,000 home equity loan. Note that most home equity loans generally have higher interest rates than cash-out refinances (see below), but it’s likely a much more favorable rate to what you’re paying in interest on that credit card debt.

Cash-Out Refinance
When you have lots of equity in your home and your current mortgage interest rate is higher than rates being offered today, a cash-out refinance is likely your best bet. With this option, you pay off your current mortgage and get cash back, which then can be used to pay off credit cards and other loans. Your new loan amount will then be more than what you had owed on your old mortgage. However, you’ll still have the same amount of total debt that you had before – it’s just been "consolidated" at a lower interest rate in one place.