Quick answer: A debt consolidation mortgage uses the equity in your home to pay off credit cards, lines of credit, car loans and CRA debt, so you make one lower payment instead of many. In BC you can usually borrow up to 80% of your home's value in total. A bank refinance costs the least; a B lender or a private second mortgage costs more but approves files a bank declines. It works best when you also stop the debt from building up again.
Most of the homeowners I help with this in Surrey and the Fraser Valley are not careless with money. A job change, a slow year in business, a separation or a tax bill pushed the cards up, and the interest now eats the payments. Here is how consolidating into your mortgage actually works.
How does a debt consolidation mortgage work?
You borrow against your home and use the money to clear your other debts. At closing, your lawyer or notary pays the cards and loans directly, so the money goes where it is meant to. The rate is far lower than a credit card's, which is often around 20%, because your home secures the loan.
There are two ways to do it:
- Refinance your whole mortgage into a larger one, with a bank or a B lender.
- Add a second mortgage and leave your first mortgage, and its rate, alone. See our guide to second mortgages in BC.
Which lender can you get: a bank, a B lender or a private lender?
Your credit, how you prove income and your equity decide which door opens. Always try the cheapest door first.
| Compare | Bank refinance | B lender refinance | Private second mortgage |
|---|---|---|---|
| Cost | Lowest rates, legal fees only | Higher rate plus a lender fee of about 1% | Highest rate, interest only, lender and broker fees |
| Term | Usually 1 to 5 years | Usually 1 to 3 years | Usually 12 months |
| Credit score | About 680 or higher | About 600 or higher | Flexible |
| Income proof | T4s or two years of tax returns | Bank statements may work | Equity and a clear exit plan |
| Most you can borrow | 80% of the home's value | 80% of the home's value | Up to about 80% combined, less outside cities |
| Keeps your current first mortgage | No | No | Yes |
| Time to fund | 3 to 6 weeks | 2 to 3 weeks | 5 to 10 business days |
Read more about B lenders in BC and private lenders in BC.
What does a debt consolidation mortgage cost?
This example is for illustration only; your rate, fees and approval depend on your full application. A Surrey home is worth $900,000. The first mortgage is $480,000 at 4.79% with 22 years left, and it renews in 60 days. Other debts total $110,000 across three credit cards, a line of credit, a car loan and a CRA balance, with payments of $3,130 a month. The bank declines the refinance because the cards are at their limits and the credit score has fallen to 620.
| Item | Today | B lender refinance | Keep the first, add a private second |
|---|---|---|---|
| New loan | None | $598,000 at 6.99%, 2 year term, 30 year amortization | $120,000 at 11.99%, 12 month term, interest only |
| APR on the new loan | None | About 7.6% | About 18% |
| Fees | None | $7,980 | $6,800 |
| Total monthly payments | $6,062 | $3,935 | $4,131 |
| Monthly saving | None | $2,128 | $1,931 |
| Borrowing as a share of the home's value | 53% | 66% | 67% combined |
The B lender fees are a 1% lender fee plus $2,000 for legal and appraisal costs. The private fees are a 2.5% lender fee, a 1.5% broker fee and $2,000 for legal and appraisal costs. Today's total is the $2,932 mortgage payment plus $3,130 of other debt payments.
Here the B lender refinance wins, because the mortgage renews in 60 days anyway, so there is no penalty for breaking it. If the first mortgage still had three years left at 4.79%, the private second would usually win, because it charges the high rate only on the new $120,000. Note that stretching the amortization to 30 years lowers the payment but adds interest over time; plan to move back to a bank at the next renewal. You can test your own debts with our debt repayment calculator and your refinance with the refinance calculator.
How much can you consolidate?
Take 80% of your home's appraised value and subtract what you owe on it. The rest, less fees, is the most you can usually borrow. Federally regulated lenders cannot refinance above 80% of the home's value, and private lenders use a similar line in Metro Vancouver and the Fraser Valley, often lower in smaller towns.
- $700,000 townhouse in Langley with $420,000 owing: up to $140,000.
- $900,000 home in Surrey with $480,000 owing: up to $240,000.
- $1,200,000 home in Burnaby with $900,000 owing: up to $60,000.
Which debts can you include?
Almost any debt can go in: credit cards, lines of credit, car loans, personal loans, payday loans and private loans. CRA tax debt is a strong reason to consolidate, because CRA charges daily compounding interest and can register a claim on your home. You can also pay out a consumer proposal early, although that can cost more than it saves; our guide to mortgages and consumer proposals shows both sides.
Is a debt consolidation loan or a mortgage better?
A debt consolidation loan is usually an unsecured personal loan. It does not touch your home, but it costs more and the limits are smaller. Since January 1, 2025, the Criminal Code caps most consumer loans at 35% APR. A mortgage costs far less, but your home is at risk if you stop paying.
- A loan often suits a smaller debt when your credit is still good.
- A mortgage often suits a larger debt, CRA debt, or a loan application that was declined.
- Credit counselling or a consumer proposal may suit you better if there is too little equity, or if the debt is too large to repay in full.
When does a debt consolidation mortgage not work?
The biggest risk is new debt. If the cards fill up again, you owe the larger mortgage and the cards. Close or lower the limits on the cards you pay off, and use part of the monthly saving to pay down the mortgage.
A private second mortgage is interest only, so its balance does not fall. It has to be paid out at the end of the term by a B lender or a bank refinance; without that exit, it renews with a new fee. It also does not work when the equity is too thin. Higher debt payments also lower what you can borrow on your next purchase, which you can check with our GDS and TDS calculator.
What protections do you have in BC?
Mortgage brokers in BC are licensed by the BC Financial Services Authority. Before you sign, your broker must give you written disclosure of the costs and risks, including the APR and every fee, and I provide that for every option I show you. Never pay a large fee up front before you have a written commitment, and be wary of anyone who promises guaranteed approval. Our bad credit mortgage guide covers the warning signs.
What are the key takeaways?
- Consolidating into your mortgage can cut your monthly payments by thousands of dollars.
- You can usually borrow up to 80% of your home's value in total.
- A refinance usually wins at renewal; a second mortgage often wins when your first mortgage has a low rate and years left.
- Compare the APR and total cost, not only the payment, and plan your exit from any B or private loan.
Carrying card or CRA debt and own your home? Book an appointment and I will compare a refinance, a second mortgage and a loan side by side, with every cost in writing.
What other questions do readers ask?
Can I consolidate debt into my mortgage with bad credit?
Often, yes. If a bank declines you, a B lender may approve a refinance with a credit score around 600 or higher, at a higher rate plus a lender fee. Below that, a private second mortgage lends mainly on your equity. Clearing the cards usually lifts your score within a few months.
Will consolidating debt into my mortgage hurt my credit?
There is a small dip from the credit check. After that your score usually rises, because your card balances drop to zero and how much of your available credit you use is one of the biggest score factors.
How much debt can I consolidate into my mortgage?
Take 80% of your home's appraised value and subtract what you owe on it. What is left, less fees, is the most you can usually borrow. On a $900,000 home with $480,000 owing, that is up to $240,000.
Can I include CRA tax debt?
Yes. Lenders often require CRA debt to be paid at closing, because CRA can register a claim on your home. Your lawyer or notary pays CRA directly from the mortgage funds.
How long does a debt consolidation mortgage take in BC?
A private second mortgage can fund in about 5 to 10 business days, a B lender refinance in 2 to 3 weeks, and a bank refinance in 3 to 6 weeks. Having your mortgage statement and every debt statement ready saves time.
Where do these numbers come from?
- Financial Consumer Agency of Canada: debt consolidation
- Financial Consumer Agency of Canada: borrowing on your home equity
- OSFI: residential mortgage underwriting guideline (80% limit on refinances)
- Criminal Code, section 347: criminal interest rate of 35% APR since January 1, 2025
- Office of the Superintendent of Bankruptcy: consumer proposals
Published November 6, 2026. This article is general information, not personal financial advice. Rates and programs change, and every approval depends on your full application. Asim Ali is a licensed mortgage broker with Dominion Lending Centres A.I.M.I. Collective Mortgage Group.