Debt consolidation mortgage: which kind fits, and what does it really cost?
Roll cards, loans and tax debt into one payment on your home. Compare the bank, B-lender and private routes, with the real cost.
Written and reviewed by Asim Ali, Mortgage BrokerUpdated 5 November 2026
Licensed: BCFSA (BC) · RECA (Alberta) · FSRA (Ontario) · check our licences
A debt consolidation mortgage uses your home equity to pay off cards, loans and tax debt. You then make one lower payment. In November 2026 a bank refinance costs 4.5-5.5%, a B-lender 6.0-8.5% plus about a 1% fee, and a private second 9.49-14.99% interest-only. Most lenders stop at 80% of your home's value. On $110,000 of debt, the payment can drop by about $2,000 a month.
How does a debt consolidation mortgage work?
You borrow against your home and use the money to pay other debts. The lender pays the cards and loans directly at closing. You are left with one mortgage payment instead of five or six bills. The rate is lower because the home secures the loan. A credit card charges about 20%. A mortgage charges 4.5% to 15%, depending on the lender.
There are two ways to do it. You can refinance the whole mortgage into a bigger one. Or you can add a second mortgage and leave your first alone.
Bank, B-lender or private: which one can you get?
Your credit, income proof and equity decide the door. Try the cheapest door first.
| Bank refinance | B-lender refinance | Private second | |
|---|---|---|---|
| Rate (November 2026) | 4.5-5.5% | 6.0-8.5%, 1-3 year term | 9.49-14.99%, 12 months, interest-only |
| Fees | Legal only | About 1% lender fee | 2-3% lender + 1-2% broker |
| Credit score | About 680+ | About 600+ | Any |
| Income proof | T4s or two years of NOAs | Bank statements OK | Equity and exit plan |
| Max loan-to-value | 80% | 80% | 80% combined |
| Keeps a cheap first mortgage | No | No | Yes |
| Time to fund | 3-6 weeks | 2-3 weeks | 5-10 days |
B-lenders include Home Trust, Equitable Bank, Haventree Bank and MCAN Home. See how B-lenders work.
What does it cost? A worked example
Illustrative example. A Surrey, BC home is worth $900,000. The first mortgage is $480,000 at 4.79% and renews in 60 days. Other debts total $110,000: three credit cards, a line of credit, a car loan and a CRA balance. The bank says no because the cards are maxed and the score fell to 620.
| Today | B-lender refinance | Keep first + private second | |
|---|---|---|---|
| New loan | n/a | $598,000 at 6.99%, 2-year term | $120,000 at 11.99%, 12 months |
| Fees | n/a | $7,980 | $6,800 |
| Total monthly payments | $6,062 | $3,935 | $4,131 |
| Monthly saving | n/a | $2,127 | $1,931 |
| Loan-to-value | 53% | 66% | 67% combined |
| APR on the new loan | n/a | about 7.6% | about 18% |
| Time to fund | n/a | 2-3 weeks | 5-10 days |
B-lender: 30-year amortization, 1% lender fee plus $2,000 legal and appraisal. Private second: 2.5% lender fee, 1.5% broker fee, $2,000 legal and appraisal. Today's debt payments are $3,130 a month on top of the $2,932 mortgage payment. Check your own numbers with the second mortgage calculator.
Here the B-lender wins. The renewal is coming anyway, so there is no penalty to break the first. If your first mortgage has three years left at 4.79%, the private second usually wins. It charges the high rate only on the new $120,000.
How much can you consolidate?
Take 80% of your home's appraised value. Subtract what you owe. The rest is the most you can borrow, before fees. Federally regulated lenders cannot refinance above 80% under OSFI Guideline B-20. Private lenders use the same 80% line in big cities. Outside them it is 70-75%.
- $700,000 home in Calgary, $420,000 owing: up to $140,000.
- $900,000 home in Surrey, $480,000 owing: up to $240,000.
- $1,000,000 home in Mississauga, $700,000 owing: up to $100,000.
Which debts can you include?
Almost any debt can go in. Common ones are credit cards, lines of credit, car loans, payday loans and private loans. CRA tax debt is a strong reason to consolidate. CRA charges compound daily interest and can register a lien. See the CRA tax debt page. You can also pay out a consumer proposal early. That can cost more than it saves. The consumer proposal page shows both numbers.
When does a debt consolidation mortgage not work?
The risk is new debt. If the cards fill up again, you now owe the mortgage and the cards. Close or lower the limits on paid-off cards. Use the monthly saving to pay down principal.
A private second is interest-only. The balance does not fall. It must be paid out at month 12 by a B-lender or bank refinance. Without that step, it renews with a new fee. Read the exit strategy guide before you sign.
It also does not work if the equity is too thin. A consumer proposal or credit counselling may then be the better tool.
Debt consolidation mortgage or debt consolidation loan?
A debt consolidation loan in Canada is usually an unsecured personal loan. It does not touch your home. It costs more than a mortgage and has smaller limits. Since 1 January 2025 the Criminal Code caps most consumer loans at 35% APR. A mortgage costs far less, but your home is at risk if you stop paying. Pick the loan if the debt is small and your credit is good. Pick the mortgage if the debt is large or the loan is declined.
Province rules you should know
BC
BCFSA regulates brokers under the Mortgage Services Act, in force 13 October 2026. You get cost and APR disclosure two business days before signing. BC lenders.
Alberta
RECA licenses brokers. You get written APR and total cost before you commit. Private rates are often the lowest of the three provinces. Alberta lenders.
Ontario
FSRA licenses brokers. A private loan comes with FSRA's written borrower disclosure, at least two business days before you commit. A second lender can start power of sale on its own. Ontario lenders.
Debt consolidation mortgage questions
Can I consolidate debt into my mortgage with bad credit?
Yes. With a score of about 600 or more, a B-lender may approve you at 6.0-8.5%. Below that, a private second lends on equity at 9.49-14.99%. Paying off the cards usually lifts your score within a few months.
Will consolidating debt into my mortgage hurt my credit?
There is a small dip from the credit check. Then your score usually rises, because your card balances fall to zero. Lower card use is one of the biggest score factors.
Is a second mortgage for debt consolidation a good idea?
It is when your first mortgage has a low rate and years left on the term. It is not when the second will renew again and again. Plan the exit to a B-lender or bank before you sign.
How long does a debt consolidation mortgage take?
A private second funds in 5-10 days. A B-lender takes 2-3 weeks. A bank takes 3-6 weeks. Have your mortgage statement and debt statements ready to save time.
Can I include my CRA tax debt?
Yes. Lenders often require it to be paid at closing, because CRA can take priority. The lender pays CRA directly from the mortgage funds.
Sources. OSFI Guideline B-20, residential mortgage underwriting (80% refinance limit) · Criminal Code s. 347, criminal interest rate of 35% APR in force 1 January 2025 · BCFSA, Mortgage Services Act and Rules, October 2026 · RECA and Alberta Cost of Credit Disclosure Regulation · FSRA, O. Reg. 188/08 s. 35 · Mortgage Directory private rates, October 2026 · Lender sites (Home Trust, Equitable Bank, Haventree Bank, MCAN Home), checked 4 November 2026.
Talk it through with a licensed broker before you decide
Tell us what is going on in a few lines. We call you back the same day with what lenders will say, what it costs in dollars, and how you get back to a bank. If private is the wrong tool, we say so.
- Your full cost, in dollars, before you commit
- The lender named on your commitment letter
- A written plan to exit within 12-24 months
Asim Ali, Mortgage BrokerSurrey office · BC, Alberta and Ontario
Tell us three things. A licensed broker calls you today.
No credit check. No ID. No date of birth. We ask what a lender decides on: the property, the equity and the deadline.
- 1Same-day call from Asim Ali or a licensed colleague
- 2A range for rate, fees and APR on the call
- 3Written commitment in 1-2 business days if you go ahead
- 4Nothing to pay until the mortgage funds
Asim Ali, Mortgage Broker
Licensed in BC, Alberta and Ontario · (604) 591-3590