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Let's face it, money is cheap right now. As a matter of fact, the last 10 years has been the best time to borrow money over the last 200 years. Well, mortgages at least. Credit card interest rates are going crazy the other way. So how can refinancing your home with a higher interest rate save you money?

To be clear, this plan involved refinancing your home mortgage and consolidating your high interest credit cards into the loan. It is very possible that you have credit card balance of $20,000 and monthly payments of $1,000, and a mortgage of the same payment amount. If you were to take that credit card balance and refinance your mortgage to pay the cards off, even with a jump in interest on the mortgage, you will be paying less.

Here is a real example of the changes in mortgage payments based on a new balance and a higher rate:

Scenario 1: A mortgage and a separate credit card balance.

Mortgage $150,000
Rate: 6.5%
Term: 30 Years
Principal & Interest Payment: $950

Credit Cards: $20,000
Rate: 15.0% - 25.0%
Payment: $1,000

Total amount paid each month: $1,950

Scenario 2: A mortgage with the credit card balance rolled in.

Mortgage $170,000
Rate: 8.0%
Term: 30 Years
Principal & Interest Payment: $1,220

Credit Cards: $0
Rate: 15.0% - 25.0%
Payment: $0

Total amount paid each month: $1,220

Even with a higher interest rate you can consolidate your credit cards and mortgage balance and pay $730 less each month.

A couple of follow up points: First, you must have the equity in your home to be able to do this, although some lenders may let you refinance for over the amount of your home value when consolidating your credit cards. Lenders like this are getting harder to find, but they are out there. Second, your credit needs to be in relatively good shape. If your credit has really been damaged by missed credit card payments, then there are other workout methods to deal with your credit card balances.

There are many other things you can do with your credit card balances, mortgage, and credit to help you reduce your monthly payments. And remember, mortgage interest is deductible on your taxes if you itemize your deductions, which is an added benefit.