Refinancing to consolidate debt
A refinance replaces your existing mortgage with a new one for a higher amount, and the difference pays off your other debts. Because it's a first mortgage, it usually carries the lowest rate. The main thing to check is your prepayment penalty. If you're mid-term on a fixed rate, the penalty can be significant. Refinancing at or near renewal is often the most cost-effective timing.
HELOC debt consolidation
A home equity line of credit lets you borrow against your equity as needed. Paying off cards with a HELOC can lower interest costs, but interest-only minimum payments mean the balance doesn't shrink unless you pay more. A HELOC works best for people who are confident they won't re-borrow.
Second mortgage debt consolidation in Toronto
A second mortgage is a separate loan behind your first, so your existing rate and term stay untouched. It can be helpful when breaking your first mortgage would be expensive or when bank qualification is a challenge. Rates and fees are typically higher, and private second mortgages are often short-term, so it's important to have a clear plan for what happens at the end of the term.
How to choose
- Compare the total cost (interest, penalties, fees), not just the monthly payment.
- Look at where you are in your current mortgage term.
- Be honest about whether a revolving line could tempt re-borrowing.
- Have an exit or pay-down plan for any short-term or private financing.