Consolidate your debt into a conventional mortgage, home equity loan or line of credit
Use your home equity to make unmanageable debt manageable. Find out how.
Consolidate your debt into one easy payment
High-interest debt from credit cards or loans makes it hard to manage your finances. But if you're a homeowner, you can take advantage of your home's equity. Combine the money you owe into a debt consolidation mortgage (also known as a conventional mortgageOpens a popup.),home equity loan or line of credit.
What's debt consolidation?
Debt consolidation is debt financing that combines 2 or more loans into one. A debt consolidation mortgage is a long-term loan that gives you the funds to pay off several debts at the same time. Once your other debts are paid off, it leaves you with just one loan to pay, rather than several.
To consolidate your debt, ask your lender for a loan equivalent to or beyond the total amount you owe. Consolidation is particularly useful for high-interest loans, such as credit cards. Usually, the lender settles all outstanding debt and all creditors are paid at once.
Know how much the loan will cost you. Read the terms and conditions — length of term, fees and interest rate — carefully before committing to a loan.
Make a budget
A budget helps you manage your finances, set financial goals and pay off debt. It also gives you boundaries on your spending and the freedom to buy what you want guilt-free. Create a monthly budgeting plan with our budget calculator.
Speak to a financial planner or a credit counsellor
A certified financial planner can help you develop a budget and debt repayment plan. An advisor at your local bank branch could help, too. A credit counsellor can help you establish healthy spending habits. To find a credit counsellor in your area, go to Credit Counselling CanadaOpens a new window in your browser..
Pay more than the monthly minimum
Increase your monthly payment amount to pay off your debt sooner.
Get protection for the unexpected
Think about a plan to continue paying down your debt when your income is reduced or eliminated.
Use credit wisely
Your credit rating determines if you qualify for a mortgage. A good rating means you'll likely get approved. A bad rating means a lower chance of loan approval. To improve your rating, pay bills on time and don't miss payments.
Why consolidate debt into a mortgage?
Refinancing your existing mortgage into a consolidation loan combines your debts into one payment. This is a great option if you have high-interest loans and you're only paying the interest rather than the principal.
When you refinance, you can get up to a maximum of 80% of the appraised value of your home minus the remaining mortgage.
Interest rates on a debt consolidation mortgage might be different from your existing mortgage. If you change your mortgage, the terms of your original agreement will likely change.
Debt consolidation mortgages come with a structured payment plan and an assured pay-off date. Payment schedules vary: weekly, biweekly, semi-monthly or monthly over a negotiated term. Refinancing fees apply, such as appraisals, title search, title insurance and legal fees.
Do your homework before committing to a debt consolidation mortgage. Know the benefits and drawbacks. You might pay a prepayment chargeOpens a popup. depending on your mortgage option.
Home equity is the difference between the value of your home and the remaining mortgage balance. Your home equity increases as you pay off your mortgage and as your home goes up in value.
You can use your home equity to get a loan or line of credit, which, like a debt consolidation mortgage, combines your debts into one payment.
For home equity loans, the lender uses your home as security. Interest rates on equity lines of credit are lower compared to other loans. You get a higher credit limit, which is useful on higher interest loans. On a home equity line of credit (HELOC), you can get a maximum of 65% of your home's appraised value. The more equity you have in your home, the more money you can borrow.
Generally, you pay interest on the money you use, not on your total credit limit. Interest rates fluctuate depending on market conditions, so your payments could go up. As long as you pay the minimum payments, you can make multiple payments without penalty. Fees apply, such as appraisals, title search, title insurance and legal fees.
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