Short answer: Rolling credit card and loan debt into your mortgage swaps 18% to 25% interest for a mortgage rate, simplifies payments and frees up cash flow. The trade offs: unsecured debt becomes secured by your home, stretching it over years can increase total interest, refinancing has costs, and it doesn’t fix overspending. It works best with a firm repayment plan.
What Is Home Equity?
Equity is your home’s value minus what you owe on the mortgage and any secured lines of credit.
Example: $600,000 value, $350,000 mortgage, $20,000 HELOC = about $230,000 equity. You usually can’t borrow all of it, but a portion may be available through a refinance, HELOC or second mortgage.
How It Works
- Refinance to a larger mortgage and use the extra to pay off cards, loans and lines of credit, or
- Set up a HELOC, pay off the debts, then pay down the HELOC over time
Benefits
- Lower interest: more of each payment goes to principal.
- One payment: no juggling due dates.
- Better cash flow: breathing room in your budget.
- A reset: a chance to set a budget and automate paydown.
Risks
- Secured debt: if you stop paying, your home is at risk.
- More total interest: stretching debt over a long amortization can cost more. Fix it with a shorter payback and extra payments.
- Doesn’t fix overspending: without a change in habits, the debt comes back.
- Refinancing costs: penalties, legal and appraisal fees. We compare total cost with savings.
Refinance vs HELOC vs Second Mortgage
| Tool | How it works | Pros | Risks |
|---|---|---|---|
| Refinance | New, larger first mortgage | One payment, usually lowest rate | Restructures the whole mortgage, possible penalty |
| HELOC | Revolving line secured on your home | Flexible, interest only option | Needs discipline |
| Second mortgage | Separate loan behind your first | Useful bridge when refinancing doesn’t fit | Higher rate, shorter term |
When It Makes Sense
You’re overwhelmed by payments, recovering from a life event, committed to not reloading credit, and the savings or relief are clear.
When to Wait
Penalties outweigh benefits, you’ll sell soon, habits haven’t changed, you’re near your borrowing limit, or you’re uncomfortable tying more debt to your home.
How We Help
We review your full picture, estimate your equity, run scenarios (status quo, partial or full consolidation, now or at term end) and talk honestly about habits and risk. Book a call.
This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed and powered by Mortgage Connection Inc.
Lacroix Mortgage Group, licensed and powered by Mortgage Connection Inc.
Tim Lacroix, Mortgage Broker · Alberta licence CON-00005179 (RECA) · BC licence 503533 (BCFSA)
Call or text (403) 648-1541 · hello@lacroixmortgage.com · Calgary, Alberta