Finding it difficult to pay your debt each month? One way you can rid yourself of the stress of paying high-interest debt is by refinancing your home. Let's run numbers to see how refinancing your home is a smart debt consolidation strategy.

Say you are like the average American with $9,000 of debt. If the interest rate on this debt is 18.9%, your monthly payments are approximately $180 a month. Assuming you never use your credit card again and pay the minimum amount each month, it would take you 8 years and 4 months to pay off your debt. Extending the payments out that long would bring the total interest to $8,840! There are probably other ways you would like to spend your money other than paying high interest expenses. How can you reduce that interest payment and possibly your monthly payment?

One way is by applying for a cash-out refinance, which is a loan for more than what you owe on your original mortgage. With the left over cash, you can pay off high-interest debt. Running numbers on the high side with a loan at 7% interest, it would take you 5 years to pay off your $9,000 debt. The total interest would be $1,672 instead of $8,840. That is a big difference.

If you apply for an interest-only loan, your monthly payments would be less because you are not paying the principle. Interest-only loans allow you to pay only the interest and no principal for the duration of the loan. By directing less of your money toward your monthly mortgage payment, you can put more money down on your other debts, paying them off faster.

Another debt consolidation strategy is to apply for a home equity line of credit, which is a second mortgage that turns your home equity into cash. This type of mortgage closes faster than a traditional first mortgage. Your rate is generally lower than a credit card and the interest is usually tax-deductible.