With fluctuating interest rates and moving to houses in 2025, many Canadian homeowners are turning to mortgage debt consolidation to simplify their finances and reduce interest costs. This involves refinancing your mortgage to include high-interest debts like credit cards and personal loans—resulting in one manageable payment and potential long-term savings.

What Is Mortgage Debt Consolidation?

Mortgage debt consolidation means replacing your current mortgage with a new one that also covers your existing debts. Instead of juggling several payments each month, you make just one—typically at a lower interest rate than most unsecured debts. This can ease financial stress and bring structure to your money management plan.

Why Consolidate Debt Through Your Mortgage?

• Lower Interest Rates: Mortgages typically offer significantly lower rates than credit cards or unsecured loans, which can lead to substantial interest savings.
• One Monthly Payment: Consolidation replaces multiple due dates with a single payment, making it easier to manage your finances.
• Improved Cash Flow: Lower monthly payments free up money for savings, emergency funds, or other essentials.

Canadian Mortgage Insights in 2025

The Bank of Canada continues to adjust interest rates in response to economic conditions, creating refinancing opportunities. For homeowners with good credit and home equity, this environment can be ideal for consolidating debt. However, extending your mortgage term could increase your total interest over time—so thoughtful planning is essential.

Mortgage vs. High-Interest Debt

In 2025, average mortgage rates in Canada range from 5.5% to 6.8%, while credit card interest often exceeds 19%. Consolidation is only beneficial if your new mortgage rate is substantially lower than your current debt rates. Keep an eye on interest rate announcements from the Bank of Canada—they directly impact what lenders offer.

Loan-to-Value (LTV) Ratio

Refinancing increases your total loan amount, which affects your Loan-to-Value (LTV) ratio. If it exceeds 80%, you may need to pay mortgage default insurance or risk being denied by lenders. A high LTV also limits flexibility for future borrowing. Always calculate your post-consolidation equity before moving forward.

Aware of Refinancing Fees and Penalties

Breaking your mortgage early can come with costs. These may include prepayment penalties, legal fees, appraisals, or administrative charges. If these fees outweigh your potential savings, the consolidation may not be worth it. Request a full cost breakdown before signing anything.

Review Your Spending

While consolidation helps organize your payments, it doesn’t eliminate the root cause of debt. Without adjusting your spending habits, you risk falling back into financial trouble. Set a realistic budget, track expenses, and limit access to high-interest credit sources.

Alternative Debt Management Options

Before using your home as leverage, explore other options. A certified credit counsellor can help you develop a debt repayment plan or negotiate with creditors. In more serious cases, a consumer proposal may reduce or forgive debt—without putting your home at risk. Speak to a Licensed Insolvency Trustee to understand every available option.

Is Mortgage Debt Consolidation Right for You?

In 2025, mortgage debt consolidation can be a powerful tool for Canadian homeowners managing multiple debts. But it’s not the right solution for everyone. Weigh the advantages—such as lower rates, simplified payments, and better cash flow—against potential downsides like refinancing costs and higher overall interest over time.

Want to Explore Your Options?

If you’re considering mortgage refinancing to consolidate debt, our team at Cannect is here to help. We’ll guide you through the process, run the numbers, and show you whether this move aligns with your financial goals—no pressure, just clear insights.

And don’t miss our Make Money Count podcast for expert tips, market updates, and smart strategies for moving to the Canadian mortgage landscape in 2025 and beyond.

Take control of your finances—one informed step at a time.