Slash your monthly payments by using your home equity.
This calculator determines if you can save money by consolidating high-interest debt (like credit cards) into a lower-rate Home Equity Loan or HELOC. Enter your home value, mortgage balance, and current debts to see your potential savings. Read the differences between a home equity loan vs. HELOC before deciding which fits your situation.
Consolidation Analysis
Compare your current debt payments vs. a new home equity loan.
| Comparison | Current Debts | New Loan |
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How Debt Consolidation Works
Debt consolidation involves taking out a new loan to pay off multiple existing debts. By using your home equity (which is secured debt), you can often get a much lower interest rate than you pay on credit cards (unsecured debt).
Key Terms
How to Use the Consolidation Calculator
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Enter your home value and mortgage balance
Use a recent estimate of your home's market value (Zillow, Redfin, or a recent appraisal) and the remaining balance on your current mortgage. The calculator uses these to determine how much equity you have.
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Add your current debts
Enter the balance, interest rate, and minimum monthly payment for each high-interest debt you'd consolidate — credit cards, personal loans, medical debt. Don't include your existing mortgage; that stays put.
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Enter the new loan terms
Add the proposed interest rate and term length for the home equity loan or HELOC. Compare against current mortgage rates to see if your quoted rate is competitive.
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Review your savings
The calculator shows your new single monthly payment, your monthly savings versus the old payments, and total lifetime interest savings. Watch the lifetime number carefully — stretching the term reduces your monthly payment but can increase total interest.
Should You Use Home Equity to Pay Off Debt?
The math usually favors consolidation — trading 22% credit card debt for 8% home equity debt is a real win. The risk is non-financial: you're moving unsecured debt onto your home. If something goes wrong financially, the consequences are bigger. Here's how the trade-off plays out:
Consolidation often makes sense when
- You have $10,000+ in high-interest credit card debt at 18% APR or higher
- You have a stable income and a track record of paying bills on time
- You'd commit to not running up the credit cards again after paying them off
- The new home equity rate is at least 8 to 10 percentage points below your blended credit card rate
- You can afford the new payment even if your circumstances change (job loss, medical emergency)
Avoid consolidation when
- You're likely to run up the credit cards again — consolidation alone doesn't fix spending habits
- Your job or income is unstable; defaulting on a home equity loan can mean foreclosure
- The total debt is small enough to pay off aggressively in 1-2 years using the credit card payoff calculator
- You'd be borrowing more than 80% of your home's value (the rate premium often kills the savings)
- You're close to retirement and want your home paid off, not re-encumbered
The honest warning: consolidation feels like progress, but it isn't actually paying down debt — it's moving it from one place to another. The single biggest predictor of whether consolidation helps long-term is whether you change the spending pattern that created the debt. If you don't, you'll have a HELOC payment and new credit card balances within a year or two.
Frequently Asked Questions
Is it smart to pay off credit cards with home equity?
It can be very smart financially because mortgage rates are typically much lower than credit card rates (often 7% to 9% versus 22% to 25%). However, you are turning unsecured debt into secured debt, meaning your home is collateral. If you default, you can lose the house — a much worse outcome than the credit card hits you'd take with unsecured debt.
What is the difference between HELOC and Home Equity Loan?
A Home Equity Loan provides a lump sum with a fixed interest rate and fixed term — predictable monthly payments. A HELOC is a revolving line of credit with a variable interest rate, similar to a credit card but secured by your home. HELOCs are flexible (draw what you need, when you need it) but the variable rate creates payment uncertainty.
Are there closing costs?
Yes, home equity loans often have closing costs ranging from 2% to 5% of the loan amount, though some lenders offer "no closing cost" options in exchange for a slightly higher rate. Factor these into your savings calculation — if closing costs are $4,000 and you save $200/month, your break-even is 20 months.
How much equity do I need to qualify?
Most lenders require you to maintain at least 15% to 20% equity in your home after the home equity loan. So if your home is worth $400,000, lenders combine your existing mortgage and new loan up to 80% or 85% of value — meaning total debt up to $320,000 to $340,000. Subtract your current mortgage balance to see how much you can borrow.
Will this hurt my credit score?
Short-term, slightly: the lender does a hard credit pull and you're adding a new account. Medium-term, it usually helps because paying off credit cards dramatically lowers your credit utilization ratio (a major scoring factor). The net effect after 6-12 months is typically positive if you don't run the cards back up.
Is the interest tax-deductible?
Only if the loan proceeds are used to "buy, build, or substantially improve" the home that secures the loan. Using a home equity loan to pay off credit card debt does not qualify under current tax law (post-2017 Tax Cuts and Jobs Act). The interest is still lower than credit card rates, but you don't get the tax break unless you're using the money on the home itself.
What if my home value drops after I take out the loan?
You'd end up "underwater" — owing more than the home is worth. This doesn't directly trigger any action; you keep making payments and the loan remains in good standing. The risk shows up if you need to sell or refinance before recovering, since you'd need to bring cash to closing to cover the gap. This is a real risk in volatile markets and is part of why borrowing close to your equity limit is dangerous.
What's the alternative if I have good credit but no home equity?
Look at unsecured personal loans (rates currently 8% to 18% depending on credit), 0% balance transfer credit cards (12 to 21 month promotional periods), or simply aggressive payoff using the avalanche or snowball method. None of these put your home at risk.
