Refinancing to consolidate debt: when it helps

Unsecured debt — cards, lines of credit, financing agreements — generally costs considerably more to carry than a mortgage does, and demands more each month. Consolidating replaces several demanding payments with one that isn't.

For a household that's servicing everything but never reducing anything, that shift is the difference between treading water and making progress.

If the debt came from a spending pattern that hasn't changed, consolidating clears the balances and the balances come back. Now there's a larger mortgage as well.

It also converts unsecured debt into debt secured against your home. That's usually the point — it's why the terms improve — but it's a genuine change in what's at stake, and it deserves a moment's thought rather than a signature.

Ask what caused the debt. If it was a definable event — a period out of work, a medical situation, a separation, a business that didn't make it — consolidation is doing exactly what it should.

If it built up gradually and nothing about the underlying pattern has changed, deal with that first. A good broker will tell you so.