Roll high-interest credit cards and loans into your mortgage to lower your monthly cost — and learn when a second mortgage is the smarter move.
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A debt consolidation refinance rolls your high-interest debts — credit cards, lines of credit, personal loans, and sometimes car loans — into your mortgage. Instead of juggling several payments at credit-card interest rates, you make one lower monthly payment tied to your home. For Ontario homeowners carrying balances across multiple lenders, this can free up meaningful cash flow every month.
Because the debt is now secured by your home, the interest rate is typically a fraction of what unsecured credit costs. That said, a refinance replaces your existing mortgage with a new one, so it is a decision that touches the largest debt you own. The goal of this page is to explain exactly how it works in Ontario, what the limits are, and when a different option (like a second mortgage) might fit better.
In Ontario, a standard refinance is capped at 80% loan-to-value (LTV). That means the total of your new mortgage plus any debts you roll in cannot exceed 80% of your home's current appraised value. If your home is worth $1,000,000, the maximum new mortgage amount is $800,000 — and that figure has to cover your existing mortgage balance, the debts you are consolidating, and the legal and appraisal costs of the refinance itself.
This 80% ceiling is set federally and applies to insured and insurable mortgages. It exists to keep homeowners from stripping all their equity. Before you refinance, your broker will order a current appraisal and calculate exactly how much room you have. If your debts exceed the 80% limit, a second mortgage or a private lender may be the path that gets you there without breaking the first mortgage.
Rule of thumb: you can refinance up to 80% of your home's value. If your debts push you past that, a second mortgage behind your existing first mortgage is often the better structure.
If you refinance before your current mortgage matures, you will likely pay a break penalty. For fixed-rate mortgages in Canada, this is usually the greater of three months' interest or the Interest Rate Differential (IRD) — and the IRD can be substantial, especially when today's rates are lower than your contract rate or you have several years left on your term.
Variable-rate mortgages are simpler: the penalty is typically three months' interest. Before committing to a refinance, your broker will request a payout statement from your current lender showing the exact penalty. Sometimes the savings from consolidating high-interest debt outweigh the penalty by a wide margin; sometimes they do not. The only way to know is to run the numbers on your actual file.
A second mortgage sits behind your existing first mortgage and lets you tap equity without breaking the first — which means no break penalty and no re-qualifying at today's stress-tested rates. For homeowners who are mid-term on a low fixed rate, breaking it to consolidate debt can erase the savings. A second mortgage, even at a higher rate, can still cost less overall than paying a large IRD plus credit-card interest.
Second mortgages are also useful when your income documentation, credit, or loan-to-value doesn't fit the prime refinance box. Private and B-lender second mortgages are more flexible on qualifying and can close quickly. The trade-off is a higher rate and shorter term, so they are typically a bridge — not a forever solution. Your broker will help you plan the exit.
We start with a no-credit-check conversation about your debts, your home value, and your goals. From there we order an appraisal, request payout statements from your current lender, and compare refinance options from prime lenders against second-mortgage options from B and private lenders. You see the full picture — penalties, new rates, total interest, monthly payment — before you decide.
As a licensed Ontario brokerage (FSRA #13564), we work with many lenders. That means we are not tied to one bank's product. Our job is to find the structure that genuinely lowers your cost, not to sell you a refinance that looks good on paper but costs more once the penalty is counted.
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