Debt Consolidation

Can I Refinance My Mortgage to Pay Off Debt?

If you’re dealing with debt while monthly mortgage payments dig deeper into your budget, then refinancing may be worth looking into.
Bruce Hodges
March 29, 2024
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Table of Contents

Can I Refinance My Mortgage to Pay Off Debt?

If you’re dealing with debt while monthly mortgage payments dig deeper into your budget, then refinancing may be worth looking into.

As mortgages near the end of their term, Canadian homeowners face the choice of renewing or refinancing their existing loan. Choosing to refinance your mortgage could mean getting a lower interest rate or accessing home equity loans, which could be a big help if you're dealing with high-interest debt. 

Key Takeaways

  • Mortgage refinancing involves negotiating with lenders to secure better terms for your loan.
  • By leveraging home equity, you can use the refinanced mortgage to pay off other high-interest debts like credit cards or personal loans.
  • Before committing to a new term, it’s important to consider all your options since interest rates and your financial situation can change over time.

What Is Mortgage Refinancing?

Refinancing is a process that changes the payment terms of your mortgage loan, which includes adjusting interest, the monthly amount you pay, and the time it takes to repay in full (the amortization period).

Take note that there are various approaches to refinancing and that homeowners should base decisions on their unique financial circumstances and goals. 

How Can Mortgage Refinancing Help Manage Debt?

Consolidating High-Interest Debt

Mortgage refinancing may allow homeowners to consolidate high-interest debt, such as credit card debt or personal loans, into their mortgage. By rolling these debts into a new mortgage, borrowers can potentially benefit from a lower overall interest rate. Mortgage interest rates are typically lower than those for other types of debt, making this consolidation an attractive option for saving money on interest payments.

Lower Interest Rates & Payments

With lower monthly payments on mortgage, you can free up funds to redirect them towards other types of debt, such as credit cards or personal loans. A small increase in monthly payments could result in big savings over time.

Access To Home Equity

Home equity is calculated by subtracting the unpaid balance on your mortgage from the market value of your property. For example, a homeowner with a property valued at $400,000 and an outstanding mortgage balance of $250,000 has an equity of $150,000. 

Depending on this amount, you may be able to access a home equity loan or a home equity line of credit (HELOC) to pay off high-interest debts or cover other financial needs.

How Do I Refinance My Mortgage?

To refinance a mortgage, you must first enter into a discussion with your current lender. You can ask if they can reduce your interest for the next term or grant you access to home equity. If your current lender cannot offer what you’re looking for, you could also explore options with other banks or financial services to see if they can provide better mortgage refinance rates.

What To Consider Before Refinancing Your Mortgage

It's important to understand how refinancing a mortgage will impact your finances in the long term, including any potential benefits or drawbacks. 

  • What are my current interest rates on existing debts? Knowing this helps gauge potential savings as you compare them with alternatives. Note that your credit score also affects the interest rates that you qualify for when refinancing.
  • Will refinancing extend the term of my mortgage? While lower monthly payments help ease cash flow problems, this could mean paying more interest over time.
  • What are the closing costs associated with refinancing? Switching to another mortgage provider may entail a prepayment penalty, home appraisal fees, and other expenses that increase the overall cost.

Essentially, refinancing your mortgage replaces your current loan with a new one to better suit your current financial situation and needs. It can provide you with enough leeway to tackle debt and reduce your monthly payments. However, refinancing is not always the best option for managing debt, especially if the long-term costs outweigh short-term benefits. Don’t jump into a decision like mortgage refinancing for the sole purpose of immediate relief.


If you’re considering refinancing your mortgage for debt management purposes, you should start by contacting your mortgage lender to get started and explore your options.

At Parachute, we understand that each individual has different financial needs. Whether you're considering mortgage refinancing or looking into debt consolidation, you may contact us here, and our team of financial coaches will help you understand the best option for your situation. 

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Bruce Hodges
Bruce, Founder and CEO of Parachute, worked for several of Canada’s top Banks, published research for the Canadian Bankers Association, and taught E-commerce Strategy in Wilfrid Laurier University’s MBA program. His first start-up built credit solutions for the likes of National Bank, Fair Isaac, and Ford Credit globally. Prior to starting Parachute, Bruce was COO of Foresters Financial, and EVP Transformation at CIBC, one of Canada’s top 5 banks. Bruce founded Parachute to disrupt the financial wellness space taking on payday, and high interest predatory lenders, with the intent to bring at risk Canadians back from the brink to good financial health.
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