Debt consolidation: lower payment or longer debt?

List every debt: the balance, the rate, the payment, what’s left to pay. Put next to it the new mortgage balance, the fees, the amortization, and what happens to the accounts once they’re paid off.

• The cash it frees up each month
• The years it adds to your repayment
• The risk of running those balances back up

Debts: $18,000 on cards at 20% and $22,000 on a line of credit at 9%, current payments of about $1,050 a month, payable in four years at that pace. Consolidated into the mortgage at 5% over 22 years of remaining amortization, that $40,000 adds about $245 to the monthly payment. Relief: more than $800 a month. But over 22 years, the interest on that $40,000 exceeds $24,000, against about $9,000 if you had kept the $1,050 going for four years. The good version of consolidation keeps part of the freed payment, say $500 a month in prepayments, which brings the debt to zero in seven years and the interest under $8,000.

If the debts will be repaid anyway within a year or two, the refinancing costs (penalty, discharge, notary) exceed the interest saved. If your property lacks the equity or your credit does not pass the review, consolidation through the mortgage is not available and a budget counsellor or a trustee may be the right person to see. And if the cards fill up again after funding, consolidation will simply have doubled the debt: without a budget and a decision on the repaid accounts, it should not happen.

A consolidation through the mortgage is a refinance, with the same rules. The new balance, debts included, cannot exceed 80% of the recognized value: that is the first gate. The second is the ratios: the lender recalculates your obligations with the new payment and without the payments on the debts being paid off, which usually helps, provided the accounts are actually settled at funding and not afterwards. The third is credit: recent late payments on the very cards you want to consolidate can close the door at a regular lender and open the one at an alternative lender, which costs more. The lender often requires that balances be paid directly by the notary out of the funds, to be sure the money goes where it was meant to. Prepare the statements for each debt with the exact balance on the target date: that document decides how much gets refinanced.

Read the refinancing guide

FCAC — Debt consolidation. Reviewed August 12, 2026.