Escape High-Interest Debt in Ontario
Combine credit cards, loans, and other high-interest debts into one manageable mortgage payment. Save thousands in interest.
What Is Debt Consolidation?
Debt consolidation through your mortgage is a strategy where you refinance your home to access equity and pay off multiple high-interest debts. Instead of juggling several payments to different creditors at various interest rates, you have one mortgage payment at a much lower rate.
For many Ontario homeowners, this approach transforms an overwhelming debt situation into something manageable. Credit cards charging 19.99% or more, car loans at 7-12%, and personal lines of credit can all be rolled into a mortgage rate that's typically 5-7%—potentially saving you thousands of dollars in interest each year.
As a licensed mortgage agent, I help homeowners evaluate whether debt consolidation makes sense for their situation. It's not the right solution for everyone, but for those with significant high-interest debt and sufficient home equity, it can be life-changing.
How Debt Consolidation Works
Before Consolidation
- • Multiple monthly payments
- • Various due dates to track
- • High interest rates (15-29%)
- • Minimum payments barely cover interest
- • Debt seems never-ending
After Consolidation
- • One simple monthly payment
- • One due date to remember
- • Low mortgage rate (5-7%)
- • Payments reduce principal faster
- • Clear path to being debt-free
Example Calculation
Current Debts
$40,000 credit cards @ 19.99%
$15,000 car loan @ 8%
$10,000 line of credit @ 9%
Total: $65,000
Current Monthly Payments
Credit cards: $1,200
Car loan: $450
Line of credit: $300
Total: $1,950/month
After Consolidation
$65,000 added to mortgage
@ 5.5% over 25 years
New payment: ~$400/month*
Savings: ~$1,550/month
* Incremental payment increase on mortgage. Total mortgage payment will be higher. This is a simplified example; actual figures vary.
Benefits of Debt Consolidation
Dramatically Lower Interest Rates
Replace 15-29% interest rates with mortgage rates of 5-7%. The interest savings can be substantial.
Reduced Monthly Payments
Lower rates and longer amortization significantly reduce your monthly cash outflow, improving your budget.
Simplified Finances
One payment, one due date, one interest rate. No more juggling multiple creditors and statements.
Improved Cash Flow
Lower payments free up money for savings, investments, emergencies, or accelerated debt repayment.
Potential Credit Score Improvement
Paying off credit cards improves your utilization ratio, which can boost your credit score over time.
Peace of Mind
Transform an overwhelming debt situation into a clear, manageable path to financial freedom.
Who Qualifies for Debt Consolidation?
To qualify for debt consolidation through your mortgage, you typically need:
- Sufficient Home Equity: At least 20% equity remaining after consolidation for prime lenders; alternative lenders may work with less.
- Income to Support Payments: You must demonstrate ability to make the new mortgage payment, including passing the stress test.
- Property in Ontario: Your home must be your primary residence (or rental property with some lenders).
Credit score is less critical than equity for debt consolidation. Even homeowners with bruised credit can often qualify through alternative or private lenders if they have substantial equity.
The Debt Consolidation Process
Debt Assessment
30 minWe review all your debts, interest rates, and monthly payments to understand your complete financial picture and consolidation potential.
Equity Analysis
1 dayCalculate your home equity and determine the maximum consolidation amount available to you through various lender options.
Savings Comparison
1-2 daysI prepare a detailed comparison showing your current payments vs. consolidated payment, total interest savings, and break-even timeline.
Application Submission
2-3 daysSubmit your application to the best-suited lender(s) with all required documentation for the fastest approval.
Approval & Conditions
5-10 daysReceive approval and work through any lender conditions. Coordinate with lawyers to prepare for closing.
Closing & Payout
Closing daySign your new mortgage documents. The lender pays off your existing mortgage and all consolidated debts directly.
Important Considerations
Secured vs. Unsecured Debt
You're converting unsecured debt (like credit cards) to secured debt (mortgage). Your home becomes collateral for all consolidated debt.
Total Interest Over Time
While your rate is lower, a longer amortization may result in more total interest paid. Consider making extra payments to offset this.
Avoiding New Debt
Consolidation only works if you don't run up new debt on paid-off credit cards. Consider your spending habits honestly.
Prepayment Penalties
Breaking your current mortgage early may incur penalties. We factor these into the cost-benefit analysis.
Future Flexibility
A larger mortgage may affect your ability to borrow in the future. Consider your medium-term financial plans.
Real Consolidation Scenarios
The Overwhelmed Professional
James, a 42-year-old project manager in Mississauga, had accumulated $75,000 in credit card debt across 6 cards after a divorce. Monthly minimums totaled $2,200, barely covering interest. His $550,000 home had a $320,000 mortgage. By consolidating into a $420,000 mortgage at 5.75%, he pays $400/month more on his mortgage but eliminated $2,200 in credit card payments—saving $1,800/month.
Monthly savings: $1,800 | Annual interest savings: $12,000+
The Young Family
Aisha and Marcus in Hamilton had $30,000 in credit cards and a $20,000 car loan accumulated during parental leaves. With a $450,000 home and $300,000 mortgage, they consolidated to a $370,000 mortgage. Their combined debt payments dropped from $1,400 to $400/month—freeing up $1,000 monthly for childcare costs and savings.
Monthly freed up: $1,000 | Debts consolidated: $50,000
The Credit-Challenged Homeowner
Robert in London had a credit score of 580 due to missed payments during illness. Banks wouldn't help with his $40,000 in debt. With $200,000 equity in his home, we secured an alternative lender consolidation at 7.5%—higher than prime but still far below his 19-29% credit card rates. Within 2 years of on-time mortgage payments, his credit recovered to 680.
Credit score improvement: 580 → 680 | Interest rate reduction: 22% average → 7.5%
* These scenarios are illustrative examples. Actual results vary based on individual circumstances.
Frequently Asked Questions
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Mortgage Agent Level 1 | Dominion Lending Centres | License #M23005941
Debt consolidation involves converting unsecured debt to secured debt against your home. Results vary by individual situation. Contact us for personalized guidance.