Before anything else, you need to know whether your equity can cover your debts, plus costs, and still leave a cushion.
The lending limit
Lenders cap total borrowing at a share of your home’s value. Federally regulated banks, for example, limit a refinance to 80% of the home’s value. Other lenders set their own limits, often lower for rural or unusual properties.
A worked example
Using round numbers only to show the math:
- Home value: $450,000
- 80% of value: $360,000 maximum total borrowing
- Current mortgage: $290,000
- Room available: about $70,000, before costs
If your debts total $45,000 and costs are a few thousand dollars, consolidation fits. If they total $90,000, a refinance alone won’t cover everything.
Costs come out of the room
Legal fees, appraisal, any lender fee and any prepayment penalty reduce what’s left for debts. See the costs of consolidating.
The appraisal sets the value
The lender uses an independent appraisal, not your property tax assessment or an online estimate.
If there isn’t enough equity
- Consolidate only the highest-interest debts. See which debts to consolidate.
- Consider a second mortgage from a lender with different limits.
- Look at alternatives. See consolidation vs counselling vs a proposal.
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.