Should I Refinance My Mortgage to Pay Off My Credit Card Debt?

Posted on 30th January 2017

Refinancing a Mortgage to Pay off Credit Card Debt

Should you refinance a mortgage to pay off credit card debt? With interest rates still near record lows, refinancing a mortgage is a popular way to pay off credit card debt. But there are a lot of factors that need to be considered before deciding if this is the right direction.

For starters, paying off high credit card debt with a refinanced mortgage should only be considered if you’re willing to change future spending habits. After all, refinancing doesn’t pay off your credit card debt. It just moves the high interest credit card debt to a lower interest rate mortgage. If you don’t figure out what lead to overspending in the first place, you could end up in a worse spot than before: a bigger mortgage and even more credit card debt to pay off.

Refinancing a mortgage to pay off credit card debt will only be effective if you change your spending habits. Fortunately, more and more Canadians are realizing the benefits of living within their means and paying off their debts. In fact, paying down credit card debt is the top financial New Year’s Resolution for most Canadians.1

This isn’t surprising given that Canadian household debt hit record levels in 2016, and higher credit card debt levels are expect to rise even further in 2017. According to the latest figures, Canadian household credit debt hit $2.04 trillion in the third quarter of 2016, with $692.0 billion in credit cards, car loans, and other personal loans.2

While some Canadians turn to debt settlement and bankruptcy to settle their credit card debt, these solutions should only be considered when you’ve run out of all other options. Not all options are created equally. If you’re stressed about credit card debt, avoid taking out a payday loan or loan title, transferring the credit card balance to a new zero-interest credit card, or cashing in a Registered Retirement Savings Plan (RRSP).

Should You Refinance to Pay off Credit Card Debt?

Canadians get into credit card debt for any number of reasons. Canadians also struggle with paying it off. It’s a destructive cycle: you put money on your credit card to help pay it down, but are left with little cash, so you end up charging expenses to the credit card.

With credit card debt at record levels, it’s easy to see that finding extra money at the end of the month to pay toward that debt is getting more and more difficult—especially when interest rates attached to credit cards can range from the teens to 20% and higher. Department store credit cards can be closer to 30%.

On the other hand, home mortgage interest rates on a five-year fixed mortgage, the most popular mortgage term in Canada , remain under five percent. If your mortgage is coming up for renewal, consolidating credit card and other high-interest debt into a new home loan can have serious benefits and translate into substantial savings.

Paying off your credit card debt by refinancing a mortgage will mean paying off the high-interest debt in full. Your credit score will increase as Canada’s credit bureaus see payment in full as a sign you are handling your credit well.

How Refinancing to Pay off Credit Card Debt Can Save You Money

Why should you refinance your mortgage? Because of the savings.

A young profession in Toronto feels crushed under a mountain of credit card debt. Despite earning $85,000 annually, they have no savings, $20,000 in credit card debt, and unsecured line of credit debt of $30,000. Their monthly payments were in excess of $1,500. They also have a $240,000 mortgage with a 4.5% rate.

With mortgage rates much lower than what the person is paying on a credit card and line of credit, it makes sense to refinance the loan, thus leveraging the refinancing process to fold the credit card and line of credit debt into a new mortgage.

Even if his mortgage was not coming up for review, it would still make sense to break the mortgage, pay the $4,500 penalty, and fold the credit card debt and credit line into a new mortgage.

The person would take on a new mortgage of $295,000 at 3.10% for four years. This equals the $240,000 mortgage balance plus $55,000 to pay off the credit card and line of credit debt.

Their old mortgage payment was $1,430 and the new mortgage payment is $2,330. The size of their mortgage increases but the monthly mortgage payments will still be less than what they would have been paying with the high-interest debt. Increased mortgage payments also lowered the amortization period from 22 years to 13 years.

Thanks to lowering the mortgage rate and saving on debt carrying costs for the line of credit and credit card, the estimated interest savings over two years is approximately $14,400., Helping Canadians Refinance and Save

If your goal is to get out from under credit card debt, refinancing your mortgage to pay your high-interest debt might be a good option. The Canadian housing market remains strong and interest rates are expected to remain near record low levels in 2017.
If your mortgage is up for renewal and you’d like to roll credit card debt into a new mortgage, it’s an excellent time to talk to a licensed agent at .

The independent agents at will help evaluate your financial situation and consider all of your options. To find out if refinancing or breaking your mortgage to pay off credit card debt is right for you, contact today. Or apply online and a lending specialist will help you set up an appointment for a free personal consultation at your earliest convenience.


1. “Paying down debt remains No. 1 priority for Canadians heading into 2017,” Newswire, December 29, 2016;
2. “National balance sheet and financial flow accounts, third quarter 2016,” Statistics Canada, December 14, 2016;

Awards & Recognitions