Many people write many things on this subject matter. But most of the articles written about debt consolidation and refinancing are written by lenders looking to increase their business. A lot of people want you to believe you can relieve yourself partially of your financial burden. But in reality, if you do end up doing business with these people, they will take an arm and a leg from you without you having knowledge of it. And once you do find out, it’s already too late. The damage has been done and cannot be reversed.

The traditional way of looking at it goes a little something like this. Let’s say that your home has appreciated in value. This means it’s worth more than what you paid for it. On one hand, you have your equity. On the other hand, you have some uncomfortable consumer debts, causing you to lose hundreds of dollars every month. So now you borrow from the equity you have in your home, thereby saving money on your monthly payments. Many people think they are making these payments tax deductible. But in reality, it’s only the actual purchase money where your debt is tax deductible.

Debt Consolidation Refinance

Let’s say you and your spouse have a $350,000 home and home prices in your neighborhood have gone up to around $500,000. Let’s say you’ve also got a few thousand dollars in consumer debt and a home improvement loan that’s worth another few grand. Then you’ve both got new cars that also require monthly payments. Then there’s the usual stuff such as insurances, utilities, property taxes, etc. All these payments can seriously add up in the long run.

Wouldn’t it be really handy if you could opt for a debt consolidation refinance and bring all those payments together into one payment on a 35 year home loan? It might cost you another few grand to get one of those refinance plans to consolidate your debts, but if you’re going to lower your monthly payments, then what the heck, right? So let’s say you successfully manage to consolidate your debts and lower your monthly payments by $1000.

You are now saving $1000 every month! Or are you?

While you may be saving lots of money on interest, you’ve paid a lot of money just for the home loan refinance debt consolidation. You’re paying off your old loans over a longer period of time. And let’s face it, once you’ve done one debt consolidation refinancing, you are at risk of doing a few more in the future. You’ll keep on doing this little trick for as long as you can in order to put off the inevitable.

Don’t get caught up in the debt consolidation game. If you are going to refinance your home, I suggest you do it wisely.