How Refinancing Your Mortgage Can Help You Take Control of High-Interest Debt

General Craig Barton 13 Jan

How Refinancing Your Mortgage Can Help You Take Control of High-Interest Debt

As a mortgage broker here in Canada, one of the most common conversations I have with clients isn’t just about buying a home—it’s about managing debt. Credit cards, lines of credit, car loans, and other high-interest obligations can quietly build up over time, even for households with solid incomes.

If you’re feeling stretched each month or frustrated that your payments don’t seem to make a dent, refinancing your mortgage to consolidate debt may be a smart option worth exploring.

What Is Debt Consolidation Through Mortgage Refinancing?

Mortgage refinancing allows you to replace your current mortgage with a new one—often with a different rate, term, or amortization—and access some of your home’s equity. That equity can be used to pay off higher-interest debts such as:

  • Credit cards

  • Personal or unsecured lines of credit

  • Car loans

  • Store cards or installment loans

  • Canada Revenue Agency balances (in some cases)

Instead of juggling multiple payments at different interest rates, those debts are rolled into your mortgage, leaving you with one payment, one rate, and one due date.

The Interest Rate Advantage

One of the biggest benefits of consolidating debt into your mortgage is the significant interest savings.

In Canada, credit card interest rates typically range from 19% to 29%, while unsecured lines of credit can sit anywhere from 7% to 14% (or higher). By contrast, mortgage rates—even in a higher-rate environment—are usually much lower.

By moving high-interest debt into a mortgage at a lower rate, more of your payment goes toward principal rather than interest. Over time, that can translate into thousands—or even tens of thousands—of dollars in savings.

Improved Monthly Cash Flow

Many clients come to me feeling overwhelmed by minimum payments. When you consolidate debts through refinancing:

  • Multiple payments become one

  • Monthly obligations are often reduced

  • Cash flow improves immediately

This breathing room can make it easier to cover everyday expenses, build savings, or plan for future goals like education costs, renovations, or retirement.

Simplified Financial Management

Managing several debts can be stressful. Each account has its own statement, payment date, and interest calculation. Refinancing simplifies your financial picture by:

  • Reducing administrative stress

  • Lowering the risk of missed payments

  • Making budgeting more predictable

For many homeowners, this simplicity alone provides real peace of mind.

Potential Credit Score Benefits

High credit card balances can negatively affect your credit score, particularly your credit utilization ratio. Paying off revolving debt through refinancing may:

  • Lower utilization

  • Improve payment consistency

  • Support long-term credit health

While refinancing itself may cause a small, short-term credit inquiry, many clients see positive credit trends over time as high-interest balances are eliminated.

Is Refinancing Right for Everyone?

Mortgage refinancing is a powerful tool, but it’s not a one-size-fits-all solution. Factors to consider include:

  • Your current mortgage rate and remaining term

  • Prepayment penalties

  • Available equity (typically up to 80% loan-to-value in Canada)

  • Long-term financial habits

It’s also important to address the root cause of debt. Consolidation works best when paired with a realistic budget and a plan to avoid rebuilding balances once they’re paid off.

Why Work With a Mortgage Broker?

As a Canadian mortgage broker, my role is to look beyond just the interest rate. I compare options from multiple lenders—including major banks, credit unions, and monoline lenders—to find a solution that fits your full financial picture.

I’ll help you understand:

  • Whether refinancing makes sense right now

  • The true cost versus long-term savings

  • Structuring the mortgage to align with your goals

Most importantly, there’s no obligation to proceed—sometimes the best advice is waiting or considering alternatives.

Final Thoughts

Your home can be more than a place to live—it can be a financial tool that helps you regain control and reduce stress. If high-interest debt is holding you back, mortgage refinancing for debt consolidation may be a smart step toward a healthier financial future.

If you’re curious about your options, a conversation costs nothing—and clarity can be the first step forward.