Low Mortgage Rate. High-Cost Debt. Now What?
The “Put Your Equity to Work” series | Part 1
You locked in a mortgage rate you feel good about. But between credit card balances, personal loans, and monthly bills, your budget still feels stretched.
Sound familiar?
A low mortgage rate can be a valuable part of your financial picture. But it doesn’t tell the whole story. If other debts carry higher interest rates, it may be time to look at what all your payments are costing you—and whether a different approach could help.
Look beyond your mortgage payment
When homeowners think about borrowing costs, their mortgage rate often gets the most attention. Meanwhile, other balances can quietly take a bigger bite out of their monthly budget.
Start by listing each debt’s:
Outstanding balance
Interest rate
Monthly payment
Expected payoff date, if you have one
Seeing everything together can help you identify which balances are the most expensive and where your money is going.
The question becomes: Does your current repayment plan support your bigger financial goals?
Could your home equity help?
Home equity is the difference between your home’s current value and what you owe on your mortgage. Eligible homeowners may be able to borrow against a portion of that equity to consolidate other debts.
Debt consolidation means using a new loan to pay off existing balances. Depending on the terms, it could simplify payments, reduce interest costs, or create more room in your monthly budget.
But it doesn’t erase what you owe. It changes how you repay it.
And when you use home equity to pay off credit cards or other unsecured debt, you’re moving that debt into borrowing secured by your home. That makes understanding the costs and risks essential.
Do you have to give up your low mortgage rate?
Not necessarily.
A home equity loan or home equity line of credit (HELOC) is separate from your existing first mortgage, so it may allow you to access equity while keeping that mortgage and its rate.
A cash-out refinance, on the other hand, replaces your existing mortgage with a larger new loan. You receive a portion of your equity in cash, which can be used to pay off other debts.
That distinction matters. If your current mortgage rate is low, replacing the entire mortgage could increase borrowing costs on a much larger balance.
The right comparison looks at your existing mortgage and other debts together, alongside the full cost of any proposed loan.
A smaller payment is only part of the equation
More breathing room each month can make a meaningful difference. Still, a lower payment doesn’t automatically mean you’ll pay less overall.
Spreading debt over a longer repayment period may lower the monthly payment while increasing total interest costs. Fees and closing costs can also affect whether consolidation makes sense. And HELOCs commonly have variable rates, meaning payments can change.
Before moving forward, compare:
Your total monthly payments before and after consolidation
Upfront fees and closing costs
How long you’ll be making payments
The estimated total cost over that time
Whether the payment could increase
Because your home serves as collateral, falling behind on home equity borrowing can put it at risk of foreclosure. It’s also worth comparing alternatives, such as an unsecured personal loan or a repayment plan developed with a nonprofit credit counselor.
Make a plan for what comes next
Consolidation works best when it’s paired with a realistic budget.
If you pay off credit cards and then build those balances back up, you could end up with both the new loan payment and new credit card bills.
Before borrowing, consider what caused the balances to grow, how you’ll manage future expenses, and what you’ll do with any monthly payment relief. A clear plan helps turn a change in borrowing into progress toward your goals.
Start with a conversation—and the numbers
You don’t have to wait until you’re ready to buy a home to talk with your lender.
If high-cost debt is putting pressure on your budget, Jim Yarrington can help you review your mortgage, outstanding balances, and potential borrowing options. That review may point toward using home equity—or keeping your current loans and focusing on a different repayment strategy.
Your low mortgage rate deserves consideration. So does the rest of your financial picture.
Jim Yarrington
Senior Mortgage Loan Officer
First State Bank Mortgage
NMLS #454680
👉 Apply online
📞 Call or text: 913-915-1855
All loans subject to approval. Equal Housing Lender.