Debt Consolidation Mortgage in Canada: Rates, Break-Even and Rules
Rolling credit cards at 22% into a mortgage at single digits is usually the cheapest money available to someone carrying balances. Here is how it works in Canada, and where it goes wrong.
Who a debt consolidation mortgage covers
- Borrowers carrying revolving balances above roughly $20,000
- Anyone whose minimum payments have stopped touching the principal
- Files where consolidating would fix the TDS ratio, not just the payment
What lenders look for on a debt consolidation mortgage file
| 80% loan-to-value ceiling | Same limit as any refinance. Consolidation is a refinance with a purpose attached. |
| Payoff direct to creditors | Most lenders insist on paying the debts directly at closing rather than advancing the cash. This is a feature, not an obstacle. |
| Amortization reset | Spreading card debt over 25 years lowers the payment enormously and can raise the total interest paid. The saving is real only if you do not re-run the balances. |
| Alternative lenders | If credit has already been damaged by the debt, a B lender will still consolidate at a higher rate, then refinance to prime once the bureau recovers. |
Debt Consolidation mortgage rates: what it costs
Consolidation is a refinance and prices on the uninsured shelf. Even at the top of that shelf it is a fraction of card rates.
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Debt Consolidation by province
Land transfer tax, minimum down payment and typical prices differ by province.
Four ways to consolidate, compared
Rolling expensive debt into a mortgage lowers the payment. Whether it lowers the cost depends on the term you stretch it over and on what you do next.
| Refinance | HELOC | Second mortgage | Leave it alone | |
|---|---|---|---|---|
| Rate on the debt | Mortgage rates — the largest drop from credit-card pricing. | Prime plus a spread. | Higher than a first mortgage, lower than a card. | Whatever the card charges. |
| What it does to the payment | Lowest monthly payment of the four. | Interest-only minimums are possible, which is both the appeal and the risk. | An extra payment alongside the mortgage. | Unchanged. |
| The real risk | Twenty-five years of a debt you would have cleared in three. Unsecured debt becomes secured against your home. | Paying only interest and never clearing the balance. | Cost, if it runs long. | Compounding at card rates. |
| Best for | A large balance, with a plan to keep the old payment going against the new mortgage. | A disciplined borrower clearing a moderate balance quickly. | Mid-term, where breaking the first mortgage costs too much. | A balance small enough to clear within a year. |
Consolidation only works once. It frees up the cards — the saving is lost the moment they fill up again.
Debt Consolidation mortgage questions
How much will it actually save me?
On $50,000 of card debt at 22% moved to a mortgage at 5%, roughly $700 a month of interest. The catch is amortization: over 25 years the total interest can exceed what you would have paid clearing the cards in three. Run both.
Will it hurt my credit?
Short term, paying revolving balances to zero usually helps materially — utilisation is a large part of the score. The risk is behavioural: cards paid off and then re-run leave you with both debts.
What if I do not have 20% equity?
A refinance stops at 80% LTV. Below that threshold the options are a second mortgage, a consumer proposal, or waiting. A broker should tell you which honestly, including when the answer is none of the above.
Will applying hurt my credit score?
A single mortgage enquiry has a small, short-lived effect. Several lenders pulling your bureau separately over weeks is worse than one broker pulling it once and taking that file to several lenders.
How long does this usually take?
A straightforward file takes a few weeks from application to approval. Alternative and private lending can move faster because less is being verified — sometimes days.
Have a debt consolidation file looked at
When you are ready to do something with these numbers, we will introduce you to a licensed broker who can put the file in front of lenders. Nothing here obliges you to.
