For many people the lowest interest debt they can obtain is their mortgage. Mortgage debt has the
lowest interest because it is secured by the collateral a real asset which is either a home or
property. Credit cards and many other types of debt are not secured by any collateral and this
increases the risk to the lender, therefore they have to be compesated by the increased risk by
charging you an increased rate. The rate for non secured debt is normally at least twice the rate
you would be able to receive from a secured rate that you obtain from a mortgage debt.
The great thing about owning a home is that when the home increases in value, this increases the
amount you can borrow against your secured collateral, in other words this creates equity. This gives
the option to the home owner to borrow more money at the lower rate. Being able to borrow money
at this lower rate can allow you to pay off the higher interest non-secured debt and therefore
lowering your total monthly payment due on all your debts.
Another huge advantage to mortgage debt is that the interest on a mortgage payment is tax
deductible. This means that every dollar you pay in interest for your mortgage payment that amount
can be written off against your gross income. Writing this off decreases the total amount of taxes
paid each year. For many people this can be in the thousands. Most non-secured debt, such as credit
cards, is not tax deductible, so this gives no benefit when it comes to writing it off on your tax
return. This means that if you refinance your mortgage to pay off non-secured debt has two big
advantages to you. First, it eliminates the high interest paid by allowing you to pay off the high
interest and then carry the debt at the new lower rate. Second, it lets you write off this lower
rate as a tax deduction at the end of the year.