For homeowners with high-interest debt

Combine credit cards and loans into one mortgage payment.

High-interest debt can eat up your income. Using your home equity to pay it off can simplify your payments and may reduce your interest. Here is how it works, and the trade-offs.

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The short versionDocumentsYour options Mistakes to avoidFirst stepsWhat we will askFAQ
The short version

How lenders look at debt consolidation borrowers

1You borrow against your home equity through a refinance, HELOC or second mortgage and use the money to pay off cards, lines of credit and loans.
2Mortgage rates are usually much lower than credit card rates, so your monthly payments can drop noticeably.
3Your debt becomes secured by your home, and a longer repayment period can mean more total interest unless you pay extra.
4It only works if the old debts stay paid off. Running the cards up again leaves you worse off.
Get ready

What lenders will ask you for

A list of every debt: balance, rate and payment (statements help)
Your current mortgage statement
Proof of income: pay stubs and T4s, or 2 years of Notices of Assessment
Property tax bill and home insurance
Photo ID
Your options

Which kind of lender fits you

Option 1

Refinance your mortgage

Roll the debts into one new mortgage payment. Check the penalty on your old mortgage first.

Option 2

HELOC

Use your credit line to pay off the debts and repay at your own pace. Flexible, but needs discipline.

Option 3

Second mortgage

Pay off the debts without touching your first mortgage. Higher rate, often private, usually shorter term.

Option 4

Debt management or consumer proposal

Outside the mortgage world. Worth knowing about if your debts are too large to consolidate. A licensed insolvency trustee can explain them.

Avoid these

Common mistakes

!Consolidating and then using the paid-off cards again.
!Rolling short-term debt into a 25 or 30 year amortization without a plan to pay it faster.
!Overlooking the prepayment penalty when refinancing mid-term.
!Waiting until payments are already being missed. Options are wider before that point.
Take action

Your first steps

1List every debt with its balance, rate and monthly payment.
2Find your mortgage balance, rate and renewal date.
3Estimate your home value.
4Gather your income documents.
5Start the intake so a broker can show you the monthly savings and the total cost of each route.
The intake

What your application will ask

Your online application goes one topic at a time and saves every answer and document as you go, so you can stop and come back. It never runs a credit check, and a licensed mortgage professional reviews it and follows up.

For debt consolidation borrowers

  1. What debts do you want to consolidate, and what is the total?
  2. What are the interest rates and monthly payments on each one?
  3. What is your estimated home value and current mortgage balance?
  4. When does your mortgage renew, and with which lender?
  5. What is your approximate household income and how is it earned?
  6. Are any of your debts behind or in collections?
  7. In the last 7 years, any bankruptcy, consumer proposal, or missed mortgage payments?

Plus the basics everyone answers 13

  1. Your full name, email, mobile number and the best time to call.
  2. The city you live in, and whether you are a Canadian citizen, permanent resident, or other status.
  3. Are you applying alone or with someone else? If with someone, their name and how you are related.
  4. Your goal: buy, refinance, renew, take out equity, or consolidate debt?
  5. The property type (house, condo, multi-unit) and the city it is in.
  6. Will you live in it, rent it out, or both?
  7. The purchase price or estimated value, and your target closing or renewal date.
  8. Your down payment or available equity, and where it comes from (savings, RRSP/FHSA, a gift, sale of another property).
  9. Your approximate yearly household income before tax.
  10. Your monthly debt payments: car loans, credit cards, lines of credit, student loans, support payments.
  11. Your own estimate of your credit score: excellent, good, fair, poor, or not sure.
  12. In the last 7 years, any bankruptcy, consumer proposal, collections, or missed mortgage payments?
  13. May the broker contact you? (A credit check is only ever run later, with your separate written consent.)
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Answers

Questions people ask

Can I roll credit card debt into my mortgage?

Yes, if you have enough equity and qualify. It is done through a refinance, a HELOC or a second mortgage.

How much could I save by consolidating?

It depends on the rates you pay today. Because credit cards carry much higher rates than mortgages, monthly payments often fall. A broker can show the exact numbers for you.

Will consolidating hurt my credit?

Paying off cards can help your credit over time, as long as you keep the balances low afterwards. A credit check will be done later with your permission.

Is debt consolidation a good idea for everyone?

No. Moving unsecured debt onto your home adds risk. If you cannot keep up with payments even after consolidating, other options such as a consumer proposal may fit better.

Can I consolidate with bad credit?

Sometimes, through a B or private lender. Expect a higher rate and fees, usually with a plan to move to a regular lender later.

Does starting the intake affect my credit?

No. The intake is just questions. A credit check is only done later, with your separate permission.

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General information, not mortgage, legal or tax advice. Lender rules change and every application is reviewed on its own facts. Your application and documents are stored privately and go only to a licensed mortgage professional at Top Mortgages Inc; they are never sold, and no credit check is run without your separate written consent.