Consolidating debt into your mortgage can be a smart reset, or a way to dig a deeper hole with a lower monthly payment. The difference is mostly about why the debt happened and what you do afterwards.
It’s often a good idea when…
- The debt came from a one-time event, like a job loss, illness, a big repair or a separation, that’s now behind you
- High interest is the main problem, not spending more than you earn
- You have enough equity to pay everything off and still keep a cushion. See equity needed.
- You’ll keep paying aggressively, not just the new minimum. See paying it off faster.
It’s often a bad idea when…
- Spending still exceeds income. The cards will fill up again.
- The debt is larger than your equity can sensibly cover
- The new payment would still stretch you
- The only lender willing is very expensive with no plan to move on
Questions to ask yourself
- What caused this debt, and has that changed?
- Will I close or limit the cards I pay off?
- Can I keep paying close to what I pay now, so the debt disappears fast?
- What will the total cost be, including fees and any penalty?
Compare the alternatives
Sometimes a balance transfer, a bank consolidation loan, credit counselling or a consumer proposal fits better. See consolidation vs counselling vs a consumer proposal.
Special situations
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.