Seven Important Risks and Options Canadian Homeowners Should Understand

Introduction

Canadian households continue to carry high levels of consumer debt.

Credit cards, personal loans, auto loans, instalment loans, and unsecured lines of credit can create significant monthly pressure, especially when interest charges rise or several payments are due at different times.

For homeowners, growing non-mortgage debt may affect more than the monthly budget. It can also influence:

• Credit history
• Debt-service ratios
• Mortgage qualification
• Refinancing options
• Available home equity
• Mortgage renewal planning
• The ability to manage unexpected expenses

Some homeowners consider using home equity to repay higher-interest consumer debt. This may reduce the number of payments or the rate charged on selected balances, but it does not eliminate the debt. It transfers those balances into borrowing secured against the home.

Before proceeding, homeowners should understand the complete debt picture, available mortgage structures, fees, repayment period, and property risk.

Quick Answer: Is Non-Mortgage Debt Rising in Canada?

Canadian consumer debt remains elevated.

TransUnion reported that total balances across Canadian consumer credit products reached approximately $2.6 trillion in the fourth quarter of 2025, an increase of 4.3% from the previous year. Its third-quarter report placed the average non-mortgage balance at approximately $27,100 per credit-active consumer, up 2.6% year over year.

Equifax reported that approximately 1.5 million Canadians missed at least one credit payment during the first quarter of 2026. This represented about one in every 21 credit-active consumers.

For homeowners, rising non-mortgage debt may reduce monthly cash flow and make mortgage qualification more difficult. Using home equity may be one option to review, but it changes unsecured debt into borrowing secured against the property.

What Counts as Non-Mortgage Debt?

Non-mortgage debt generally includes consumer borrowing that is not a residential mortgage.

Examples include:

• Credit cards
• Personal loans
• Auto loans
• Unsecured lines of credit
• Instalment loans
• Retail financing
• Certain other consumer credit products

A HELOC or second mortgage is secured against the home and is therefore different from ordinary unsecured consumer debt.

Important Debt Terms

Consumer credit balance: The total amount owed across consumer borrowing products. Some industry reports use this term broadly and may include mortgages.

Non-mortgage debt: Consumer borrowing other than residential mortgage balances.

Delinquency: A payment that is past due. The exact threshold may vary by lender or data provider.

Serious delinquency: Often refers to an account that is at least 90 days past due.

Debt-service ratio: The share of disposable income used for required principal and interest payments.

Credit-market debt: A broad measure that includes mortgage debt, consumer credit, and other household loans.

These measures describe different parts of the debt picture and should not be treated as interchangeable.

What Do the Latest Canadian Debt Numbers Show?

TransUnion reported that total Canadian consumer credit balances reached approximately $2.6 trillion in the fourth quarter of 2025. The number of credit-active Canadians increased more slowly than total balances, suggesting that balance growth was not caused only by growth in the number of borrowers.

Its third-quarter 2025 report found that the average non-mortgage balance reached approximately $27,100 per consumer.

Statistics Canada reported that household credit-market debt was approximately $1.80 for every dollar of household disposable income in the first quarter of 2026. The household debt-service ratio was approximately 14.75%, while the non-mortgage debt-service ratio was approximately 6.91%.

These figures measure different things:

• Total balances show how much consumers owe
• Average balances show debt per credit-active consumer
• Delinquency figures show whether payments are being missed
• Debt-service ratios show how much income is required for payments

A large balance does not always mean a household is in immediate financial difficulty. The interest rates, minimum payments, income, and monthly budget also matter.

At Mortgage Brain, we often see homeowners with similar total debt balances but very different levels of financial pressure. One household may have manageable low-rate payments, while another may be carrying several high-rate balances with limited income remaining each month.

Why Are Non-Mortgage Debt Balances Remaining High?

There is no single cause. Several pressures may affect household borrowing at the same time.

Higher Everyday Expenses

Housing, food, utilities, transportation, insurance, and other essential expenses can leave less income available for debt repayment.

Some households may use credit cards or lines of credit to cover a temporary shortfall. When the shortfall continues, the balance can grow even when the borrower is making the minimum payment.

Interest Charges

Higher borrowing rates increase the cost of carrying debt.

A household may keep the same credit-card or line-of-credit balance but pay more interest each month, leaving less money available to reduce principal.

Several Separate Monthly Payments

A homeowner may be managing:

• Multiple credit cards
• A vehicle loan
• A personal loan
• An unsecured line of credit
• Mortgage payments
• Property taxes
• Insurance
• Household expenses

Even when each payment appears manageable on its own, the combined monthly requirement can create significant pressure.

Greater Pressure Among Some Borrowers

TransUnion reported that growth in non-mortgage balances was driven partly by increased borrowing among younger Canadians, newcomers, and below-prime borrowers. Subprime consumers also experienced greater delinquency pressure than prime and higher-credit borrowers.

This does not mean every younger or lower-credit borrower is struggling. It shows that debt pressure is not distributed evenly across the population.

What Happens When Consumer Debt Becomes Delinquent?

A payment may become delinquent when it is not made by the required date.

Possible consequences include:

• Late-payment fees
• Additional interest
• Credit-report damage
• Reduced access to new credit
• Collection calls or notices
• The account being sent to a collection agency
• Legal action in some circumstances
• More difficult mortgage qualification

Missing one payment is not the same as being 90 days overdue.

The lender, amount of time past due, payment history, account type, and borrower’s complete credit profile can all affect the consequences.

A serious delinquency may reduce the number of traditional mortgage options available, but it does not automatically mean that bankruptcy or a consumer proposal is the only remaining choice.

Possible steps may include:

• Contacting the creditor
• Reviewing a payment arrangement
• Speaking with a credit counsellor
• Reviewing mortgage-based consolidation where suitable
• Obtaining information from a Licensed Insolvency Trustee

Early action may preserve more options, but no particular result can be guaranteed.

How Can Non-Mortgage Debt Affect Homeowners?

Mortgage Qualification

Lenders may include credit-card, loan, line-of-credit, and vehicle payments when calculating debt-service ratios.

Higher monthly obligations may reduce the mortgage amount a homeowner can qualify for.

Mortgage Refinancing

A homeowner may have substantial property equity but still face difficulty refinancing if:

• Income is not sufficient
• Credit has been damaged
• Debt-service ratios are too high
• Mortgage payments have been missed
• The property does not meet lender requirements

Home equity can support a lender’s security, but it does not automatically establish affordability.

Mortgage Renewal and Switching Lenders

Renewing with an existing lender may involve a different process from moving to a new lender.

Switching lenders, increasing the mortgage amount, or refinancing generally requires a new qualification review.

A high debt load may therefore affect the homeowner’s ability to obtain a more competitive mortgage elsewhere.

Monthly Cash Flow

High minimum payments can leave little money available for:

• Savings
• Property repairs
• Emergencies
• Insurance increases
• Property-tax changes
• Mortgage-payment increases

At Mortgage Brain, we review not only the debt balance but also the monthly cash-flow shortfall and upcoming mortgage renewal date.

Can Home Equity Help Consolidate Consumer Debt?

Homeowners may be able to review several mortgage-based options.

These options do not eliminate the debt. They use new borrowing secured against the property to repay selected creditors.

1. Mortgage Refinance

A mortgage refinance replaces the current mortgage with a new mortgage.

The new amount may include:

• The existing mortgage balance
• Selected consumer debts
• Mortgage penalties
• Legal or appraisal costs
• Other approved expenses

Potential benefits

• One scheduled mortgage payment
• A rate that may be lower than certain unsecured debts
• Principal-and-interest repayment
• A longer repayment period

Risks and costs

• Prepayment charge for breaking the existing mortgage
• Legal and appraisal costs
• Longer amortization
• Higher total interest
• Reduced home equity
• Consumer debt becoming secured against the property

A lower monthly payment may result from extending the repayment period. It should not automatically be described as a saving.

At Mortgage Brain, we compare the mortgage penalty, fees, new amortization, total borrowing cost, and balance remaining after the initial term.

2. HELOC

A Home Equity Line of Credit provides revolving borrowing secured against the property.

Potential benefits

• Flexible access to funds
• Interest charged only on the amount used
• Repaid funds may be available again
• A rate that may be lower than certain unsecured debts

Risks and costs

• Variable interest rate
• Minimum payments may not reduce principal
• Repaid funds can be borrowed again
• The balance reduces available home equity
• The lender may have rights under the agreement to review or limit access

A HELOC may lower the rate charged on selected debts, but it requires a clear principal-repayment plan.

At Mortgage Brain, we often see debt consolidation fail when credit cards are repaid through a HELOC, the HELOC principal remains outstanding, and the cleared cards are later used again.

3. Second Mortgage

A second mortgage is an additional mortgage registered behind the first mortgage.

It may be considered when a full refinance is unavailable or when breaking the first mortgage would create a substantial penalty.

Potential benefits

• The existing first mortgage remains in place
• Lump-sum access to funds
• Some alternative or private lenders may use more flexible qualification criteria

Risks and costs

• Higher rates than many first mortgages
• Lender and brokerage fees
• Legal and appraisal costs
• Short mortgage term
• Renewal or refinancing risk
• Mortgage-enforcement risk if payments are missed

A second mortgage should include a realistic repayment or exit strategy.

4. Reverse Mortgage for Eligible Homeowners

A reverse mortgage may allow an eligible homeowner, generally aged 55 or older, to access part of the home’s value without making regular mortgage payments.

Interest is added to the balance, causing the amount owed to grow over time.

Possible considerations include:

• Higher rates than traditional mortgage products
• Declining home equity
• Existing mortgages being repaid from the proceeds
• Estate implications
• Property-tax and insurance obligations
• A growing balance due when the property is sold, the homeowner moves, or the last borrower dies

A reverse mortgage may improve short-term cash flow, but it is not a debt-reduction product. It transfers debts into a mortgage whose balance may grow.

Comparing Home Equity Options

Feature	Refinance	HELOC	Second Mortgage	Reverse Mortgage
Existing first mortgage	Replaced	Usually remains	Remains	Usually repaid from proceeds
Funds	Lump sum	Revolving credit	Lump sum	Lump sum or scheduled advances
Payment	Principal and interest	May be interest only	Interest only or amortizing	Regular payments generally not required
Rate type	Fixed or variable	Usually variable	Fixed or variable	Fixed or variable, depending on product
Main qualification factors	Income, credit, property	Income, credit, equity	Income, credit, equity, property	Age, property, equity, lender requirements
Main risk	Penalty and extended repayment	Persistent revolving debt	Higher costs and short-term maturity	Growing balance and declining equity

This comparison is general. Product terms, rates, costs, and qualification requirements vary by lender and borrower.

The Approved Mortgage Is Not Always the Net Amount Available

Mortgage-based consolidation may involve several deductions.

These may include:

• Existing mortgage payout
• Prepayment charge
• Lender fee
• Brokerage fee
• Legal costs
• Appraisal expense
• Property-tax arrears
• Mortgage arrears
• Registered judgments
• Required creditor payouts

For example, a $100,000 second-mortgage approval may provide substantially less than $100,000 in funds after deductions.

The amount remaining after these costs is the net advance.

At Mortgage Brain, we often see homeowners focus on the gross approved amount. The net advance determines whether there is enough money to complete the proposed consolidation.

Does Debt Consolidation Reduce What You Owe?

Mortgage debt consolidation normally does not reduce the principal owed.

It changes:

• Which lender is owed
• The interest rate
• The repayment period
• The required monthly payment
• Whether the debt is secured against the home

Debt may only be reduced when creditors agree to accept less through a separate settlement or formal insolvency process.

A lower interest rate can reduce interest costs, but extending a balance over a much longer period may increase the total amount of interest paid.

The homeowner should compare:

• Current total payments
• Proposed mortgage payment
• Interest rate
• Annual percentage rate
• Fees
• Amortization
• Total estimated interest
• Balance after five years
• Property risk
• Equity remaining

What Should Happen to Paid Credit Accounts?

A consolidation plan should address what happens after the debts are repaid.

Questions to review include:

• Will credit-card limits be reduced?
• Will any accounts be closed?
• Are the accounts needed for ordinary transactions?
• How will future spending be managed?
• Is there a realistic monthly budget?
• Is an emergency fund possible?
• What caused the balances to grow?

Closing every credit account is not automatically appropriate because it may affect access to credit and the credit profile.

The plan should reflect the homeowner’s circumstances rather than using one rule for every borrower.

When Should a Homeowner Speak With a Licensed Insolvency Trustee?

Mortgage borrowing may not be appropriate when:

• The household cannot afford the proposed payment
• There is no realistic repayment plan
• Debts exceed the household’s ability to repay
• Collection or legal action is underway
• The homeowner is considering a consumer proposal
• Bankruptcy information is needed
• Using more home equity would create unacceptable property risk

A Licensed Insolvency Trustee is the federally licensed professional authorized to administer consumer proposals and bankruptcies in Canada.

A mortgage professional should not provide insolvency, legal, or tax advice outside their licence and expertise.

What Does FSRA Require From Ontario Mortgage Brokerages?

Section 24 of Ontario Regulation 188/08 requires an Ontario mortgage brokerage to take reasonable steps to ensure that a mortgage it presents is suitable for the client’s unique needs and circumstances.

A suitability assessment may consider:

• Income and employment
• Credit history
• Existing debts
• Property value and equity
• Payment affordability
• Mortgage term and amortization
• Rate and fees
• Material risks
• Borrowing purpose
• Available mortgage options
• Repayment or exit strategy

Cost-of-borrowing disclosure is governed separately. Section 23 of the Mortgage Brokerages, Lenders and Administrators Act requires applicable borrowing-cost disclosure, while Ontario Regulation 191/08 explains how costs and APR are calculated and disclosed.

The lender’s willingness to approve a mortgage does not, by itself, establish that the mortgage is suitable.

Frequently Asked Questions

What Counts as Non-Mortgage Debt?

It may include credit cards, personal loans, auto loans, unsecured lines of credit, instalment loans, and other consumer credit products that are not residential mortgages.

How Much Non-Mortgage Debt Does the Average Canadian Have?

TransUnion reported an average non-mortgage balance of approximately $27,100 per credit-active consumer in the third quarter of 2025. This does not mean every Canadian or every household owes that amount.

How Many Canadians Are Missing Credit Payments?

Equifax reported that approximately 1.5 million Canadians missed at least one credit payment during the first quarter of 2026.

What Does 90 Days Past Due Mean?

It generally means the account payment is at least three months overdue and may be considered seriously delinquent.

The exact classification depends on the lender or credit-reporting methodology.

Can I Refinance if I Have Missed Payments?

Possibly.

Qualification depends on:

• Income
• Property equity
• Mortgage-payment history
• Credit profile
• Debt-service ratios
• Property
• Lender requirements
• How recent and serious the missed payments are

Approval is not guaranteed.

Can I Use My Mortgage to Pay Credit-Card Debt?

Possibly, but the credit-card balances become debt secured against the home.

The mortgage penalty, fees, payment, amortization, total interest, and property risk should be reviewed.

Is a HELOC Better Than Refinancing?

Neither is automatically better.

A HELOC offers revolving credit and usually has a variable rate. Refinancing replaces the first mortgage and may involve a prepayment charge.

Will Consolidation Improve My Credit Score?

No specific credit result can be guaranteed.

The effect depends on:

• Payment history
• Credit utilization
• Accounts remaining open
• New credit inquiries
• Future balances
• Whether payments are made on time

Does Consolidation Reduce What I Owe?

Usually not.

It changes how and where the debt is repaid unless creditors separately agree to accept less.

Can I Use a Reverse Mortgage for Debt Consolidation?

Eligible homeowners may be able to use reverse-mortgage proceeds to repay selected debts.

However, the reverse-mortgage balance grows as interest accumulates, reducing the homeowner’s remaining equity.

What Happens if the Debt Returns?

The homeowner may be left with:

• A larger mortgage
• New unsecured balances
• Higher total debt
• Less available equity
• Greater monthly pressure

This is why the post-consolidation budget and account plan matter.

How Mortgage Brain Can Help

Mortgage Brain helps Ontario homeowners review mortgage-based debt consolidation options where appropriate.

Our review may include:

• Current mortgage balance and rate
• Mortgage renewal date
• Estimated prepayment charge
• Property value
• Available home equity
• Credit cards and loans
• Monthly minimum payments
• Household income and expenses
• Credit history
• Payment affordability
• Mortgage refinancing
• HELOCs
• Home equity loans
• Second mortgages
• Private mortgage options
• Reverse mortgages for eligible homeowners
• Lender and brokerage fees
• Legal and appraisal costs
• Net funds
• Total estimated interest
• Equity remaining
• Repayment or exit plan

At Mortgage Brain, we do not evaluate financial pressure using the total debt balance alone.

We also review:

• Interest rates
• Required monthly payments
• Mortgage renewal timing
• Household cash-flow shortfall
• Property risk
• The likelihood of rebuilding paid debt

Use the Mortgage Brain home equity calculator to estimate your gross equity and understand how existing secured debts may affect potential borrowing capacity.

You can also use the Mortgage Brain mortgage calculator to compare estimated payments using different mortgage amounts, rates, and repayment periods.

Calculator results are estimates only. They are not mortgage approvals, rate quotes, commitments, qualification decisions, or personal recommendations.

After reviewing your numbers, Contact Us to request an initial consultation with a licensed Mortgage Brain professional.

We can explain how refinancing, a HELOC, a home equity loan, a second mortgage, or another available option may affect your payment, total borrowing cost, and home equity.

Mortgage Brain documents why a mortgage presented appears suitable based on the information available.

Approval, lower payments, interest savings, debt reduction, refinancing, credit improvement, and future lender availability cannot be guaranteed.

Final Thoughts

Canadian non-mortgage debt remains elevated, and a significant number of consumers continue to miss payments.

For homeowners, consumer debt can affect:

• Monthly cash flow
• Credit history
• Debt-service ratios
• Mortgage qualification
• Refinancing
• Renewal options
• Available equity

Home equity may provide access to debt-consolidation options, but it should not be treated as free money.

Mortgage refinancing, HELOCs, second mortgages, and reverse mortgages all create debt secured against the home.

Before proceeding, compare:

• The current debt
• Interest rates
• Monthly payments
• Mortgage penalty
• Fees
• Repayment period
• Total estimated interest
• Net funds
• Equity remaining
• Property risk
• Post-consolidation budget

The goal should not simply be to reduce the first monthly payment. It should be to create a realistic repayment structure that the homeowner can manage without repeatedly rebuilding the debt.

Disclaimer

This article is for general educational purposes only. It does not provide mortgage, financial, legal, tax, credit-counselling, or insolvency advice.

Mortgage Brain is a licensed Ontario mortgage brokerage. Mortgage products are subject to lender approval, income verification, credit review, property requirements, appraisal, legal review, applicable laws, and individual lender policies.

Consumer-debt data may differ by provider because TransUnion, Equifax, and Statistics Canada use different populations, products, definitions, and reporting methods.

Rates, fees, terms, qualification requirements, lender conditions, and product availability may change.

Mortgage Brain does not guarantee approval, lower payments, interest savings, debt reduction, refinancing, renewal, improved credit, or any specific financial result.

Last updated: July 15, 2026

Data Sources

• TransUnion Canada, Q4 2025 Credit Industry Insights Report.
• TransUnion Canada, Q3 2025 Credit Industry Insights Report.
• TransUnion Canada, Q2 2025 Credit Industry Insights Report.
• TransUnion Canada, Q1 2025 Credit Industry Insights Report.
• Equifax Canada, The Resilient North: Q1 2026 Consumer Credit Trends.
• Statistics Canada, Household Sector Credit Market Summary, Q1 2026.
• Statistics Canada, Debt Service Indicators of Households, Q1 2026.
• Financial Services Regulatory Authority of Ontario, Mortgage Product Suitability Assessment.
• Financial Services Regulatory Authority of Ontario, Mortgage Brokerage Disclosure Requirements.
• Financial Services Regulatory Authority of Ontario, Cost of Borrowing and APR Compliance.