With the holiday season officially in the rearview mirror, you may find yourself in a not-so-desirable financial situation. Between buying gifts, baking, making meals and entertaining, it’s not hard to rack up unexpected credit card debt as you enter the new year. If this sounds like a familiar situation, you may want to consider refinancing. While this isn’t always an option for everyone, it may help you consolidate your debt and start the new year off with a fresh outlook on your finances.

Pros Of Refinancing

There are plenty of reasons you may want to consider refinancing your mortgage. From convenient perks to money saving incentives, it’s worth looking into!

Delay First Mortgage Payment By A Month

Depending on your closing date and disbursement date, the payment for a refinanced mortgage won’t be due for at least 30 days, so this gives you additional time to get some cash together once you return to work and your regular schedule. While this isn’t necessarily saving you money, it is giving you a little more breathing room at a time when things may be a bit stressful finance wise.

Equity Take-Out Refinance To Leverage Home Equity

An equity take-out refinance transaction can help you pay off consumer debt or borrow money against the equity you’ve built up in your home. You’ll be negotiating the terms of your mortgage and securing the loan in the same process as your original mortgage, except when you choose a equity take out refinance, you’re essentially refinancing your mortgage for more than you owe and pocketing the difference in cash.

The more equity you have built up in your home, the more money you can convert to cash. In most cases, you won’t be able to take the full equity value in cash, so for planning purposes, it’s safe to assume you can refinance about 80% of the value. The main benefit of choosing this option is that you’ll be dealing with a fixed interest rate, and you’ll have the ability to make small, consistent payments over the long term. If you have solid equity in your home and your credit score is good, a refinance may be the best choice for you.

Debt Consolidation

It may be worth exploring debt consolidation if you’re carrying credit card debt or owe money for multiple loans with high interest rates. You have the option to use a refinance to consolidate all your current debt to help you lower your monthly payments in general which could ease the financial tension you’re experiencing at the start of the year and beyond. Be sure to investigate this option further with a professional to determine if it’s a good fit for your needs and if it will actually help lower your payments in the long run.

Better Rates

Refinancing your mortgage allows you the opportunity to lock in a much lower rate for years to come. This can save you a lot of money over time, depending on the prepayment penalty and the size of your outstanding loan. Don’t let the prospect of a penalty deter you, though. Take the time to crunch the numbers and learn more about whether the risk will be worth the reward, because it often is.

Paying Off Your Home Early

Choosing to refinance can help you lock in a lower interest rate and/or shorten your loan term. Refinancing into a shorter-term loan, such as switching from a 30-year mortgage to a 15-year mortgage, can also help bring down your interest rate while putting you on the path to early payoff. However, do keep in mind that a shorter term means a higher monthly payment.

Other Considerations

Aside from simply focusing on the pros, there are other considerations you’ll want to make before deciding if refinancing is the right decision for you.

Create A Budget

Creating a budget can help you see your financial situation more clearly. It can also help you determine if you’re spending a lot on needs or simply wants, and if there’s a way to increase your disposable income by eliminating some unnecessary spending. You may be surprised to know that you have more money than you think, you just need to spend it wisely.

The money you save when cutting unnecessary items out of your budget can be used to pay off your holiday debt consolidation loan. The faster your debt is paid off, the more money you’ll end up saving by avoiding increasing interest fees. 

Standard Vs. Collateral Charge Mortgage

You’ll want to determine what type of mortgage you have. Is it a standard charge or a collateral charge mortgage? If it’s standard charge and there is equity available, you can likely move forward seeking out your refinancing options. If you have a collateral charge mortgage, then you’ll have to go to your current lender for any funds you may need.

Renewal Penalties

The last thing you want to do is be slapped with a renewal penalty for choosing to refinance before your current term has elapsed. You’ll first want to determine if you can expect a penalty or not, based on how far into your term you currently are. If you’re close to renewal, the penalty will likely be minimal. If you’re only 2 years into a 5-year term, you can expect to be hit with a larger penalty. Despite all that, sometimes the financial penalties are worth the lower interest rates and better terms you’re planning to trade in for. Calculating all of this in advance is crucial to ensuring you make the smartest financial decision for your personal situation.

Credit History

Your credit history accounts for 35% of your credit score, which means that lenders will be studying this information closely to determine what interest rates you qualify for when refinancing. It’s important to keep your oldest credit card(s) open and ensure your debt-to-income ratio is manageable. If anything can stand to improve, it’s wise to make those improvements before applying to refinance so you can get access to the best possible rates.


Holiday debt doesn’t have to be a life sentence! The last thing you want is to drag unwanted debt into the new year and put extra strain on your finances. When considering your options as you move forward, don’t overlook the value of refinancing and how it can help you manage and conquer your financial goals in 2022 and beyond!