If you’re staring down a mountain of credit card or line-of-credit debt, you’re not alone. Thousands of Ontario homeowners are sitting on home equity while juggling high-interest payments. But what if you could use that equity to crush your debt—and breathe again?
Let’s talk about what it really means to refinance your mortgage to pay off debt, how it works, and whether it’s the right move for you. No fluff. Just straight answers backed by FSRA regulations and real math.
What It Means to Refinance Your Mortgage to Pay Off Debt
A Plain-English Breakdown
Refinancing means breaking your current mortgage and replacing it with a new one. Ideally, the new mortgage comes with a better rate, a longer term, or a larger amount—so you can tap into your home’s equity and use that cash to eliminate your high-interest debts.
Example:
Say you’ve got $60,000 in credit card and personal line-of-credit debt. Instead of juggling multiple payments at 19% interest, you roll that $60K into a new mortgage at 5.5%. Your monthly outflow drops big time—and you free up cash flow to start living again.
Why Ontario Homeowners Are Doing This Now
Interest rates on unsecured debt have spiked (19%+ on average).
Property values across Ontario remain high, creating equity opportunities.
FSRA regulations (like O. Reg. 188/08) require brokers to fully explain the risks and benefits—so you’re not going in blind.
Can You Legally Refinance to Pay Off Personal Debt?
Yes—but Only With Full Transparency and Suitability
Under Ontario’s Mortgage Brokerages: Standards of Practice (O. Reg. 188/08), mortgage brokers and agents must:
Disclose the total cost of borrowing – including interest, penalties, fees (s. 24).
Assess whether the mortgage is suitable – for your actual situation (s. 24(2)(b)).
Act in your best interest – not the lender’s, not their own (s. 14 & s. 15).
Bottom line: if it’s not a fit, we don’t recommend it.
What Your Broker Must Disclose
Legally, your mortgage agent must give you a full picture of:
Any break penalties on your existing mortgage
The interest savings vs. the new mortgage cost
All fees and charges associated with the refinance
If you don’t see this in writing—run. Fast.
Pros of Using a Mortgage to Kill Off High-Interest Debt
Lower Monthly Payments
Let’s say you’ve got $40,000 in credit card debt:
Credit card payments: $1,000/month at 19.99%
Refinanced mortgage payment: ~$230/month at 5.5%
That’s over $750/month in savings. Real money. Real relief.
One Simple Monthly Payment
No more juggling minimum payments across 5 cards, a car loan, and a personal line of credit. Just one clean payment tied to your mortgage.
Credit Score Recovery
When you pay off your revolving debt, your credit utilization drops—one of the fastest ways to boost your score. Better credit = better rates later.
Risks to Watch Out For
Longer Repayment = More Interest Over Time
That $40K at 5.5% might seem like a win, but if you stretch it over 25 years, you’ll pay more in interest overall. That’s why mortgage brokers are legally required to show you the total cost of borrowing (O. Reg. 188/08, s. 24). Don’t skip this step.
Equity Erosion
You’re swapping ownership (equity) for debt. If property values dip or you hit a financial emergency, having less equity could limit your options.
Break Penalties on Existing Mortgage
Fixed-rate mortgage? You could get hit with thousands in break fees. This is a common trap. Your agent must calculate and explain this before you sign anything.
How to Know if Refinancing Is Right for You
Suitability Questions to Ask
Can I realistically manage the new mortgage payment?
Will this actually reduce my financial stress long term?
Am I ready to stop relying on unsecured credit going forward?
Why a Licensed Mortgage Agent Matters
Ontario mortgage agents are licensed under O. Reg. 409/07 and must comply with O. Reg. 188/08. That means:
A full needs assessment must be completed (s. 14)
You’ll get clear, written disclosures about your options and costs
We have a duty to protect your interests, not the lender’s (s. 15)
Step-by-Step: How to Refinance Your Mortgage to Pay Off Debt
Check Your Equity
Get your home’s current market value. Subtract your mortgage balance.Review Existing Mortgage Terms
Fixed or variable? What’s the penalty to break?Take Inventory of Your Debts
Total balances, interest rates, and monthly payments.Work With a Licensed Agent
Run real numbers. See if the strategy works for you, not just on paper.Submit Your Application
You’ll need income verification, credit report, and property docs.Review Final Disclosure
As required by law, you’ll get full documentation of the new mortgage terms—before you commit.
Real Ontario Case Study: John & Maria in Mississauga
John and Maria were carrying $75,000 in high-interest credit card and personal loan debt, with blended rates near 19.99%. Their home in Mississauga was worth $950,000, and they had a mortgage balance of $525,000.
They were barely keeping up with minimum payments, and the monthly cash flow crunch was pushing them toward insolvency.
Before Refinancing:
Unsecured debt: $75,000 @ ~19.99%
Monthly unsecured payments: ~$1,875
Existing mortgage: $525,000 @ 5.2% = ~$3,140/month
Total monthly outflow: ~$5,015/month
After Refinancing:
New mortgage: $600,000 @ 5.5%, 25-year amortization
New monthly mortgage payment: ~$3,662
Unsecured debt paid off: $0
Total monthly outflow: ~$3,662/month
Monthly Savings: ~$1,353/month
They went from drowning in debt payments to breathing room—with one manageable mortgage and a solid plan to stay debt-free.
Key Takeaway: It wasn’t a silver bullet, but it was the exact reset they needed. And because they worked with a licensed mortgage agent, they got a full cost-benefit breakdown before making the move.
The key? Working with a licensed mortgage professional who plays by the rules. We’ll walk you through everything, legally and clearly. You’ll see the risks, the benefits, and the math—no pressure, no surprises.
Want Help Figuring It Out?
Let’s cut through the noise and figure out if this works for your situation.
Free home equity + debt analysis
No-pressure consultation with a licensed Ontario agent
Transparent recommendations that put you first
Book your free consultation now. Or message us directly—we’ll get back to you within 24 hours.
About Us
We’re a team of licensed mortgage professionals based in Ontario, with deep expertise in debt consolidation, equity lending, and home financing strategies. We specialize in helping homeowners use their equity to regain financial control—without the fluff, pressure, or one-size-fits-all advice.
Every recommendation we make is grounded in FSRA-regulated practices, backed by real data, and designed to help you make smart, stress-free decisions.
When you work with us, you get straight answers, transparent numbers, and a team that puts your financial outcome first—every time. Contact us today for a free consultation to determine if a mortgage refinance is right for you.
Compliance Note
This article is for informational purposes only and is not intended as financial or mortgage advice. All mortgage strategies should be reviewed with a licensed mortgage professional who can assess your individual needs. We operate in accordance with Ontario’s Mortgage Brokerages, Lenders and Administrators Act, 2006 and all applicableFSRA regulations.
