Looking to Consolidate Debt in Ontario?

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If you're struggling with debt in Ontario—especially high-interest credit cards or personal loans—you’re not alone. For many people, making the minimum payments each month barely makes a dent. That’s where a second mortgage can help. It’s a way to use the equity in your home to borrow money at a lower interest rate so you can consolidate and pay off your debt faster.

Reasons to Pay Off Debt with a Second Mortgage

A second mortgage is a loan that uses your home’s equity—the part of your home you fully own—as collateral. It’s called a “second” mortgage because it comes after your first mortgage, which you used to buy the home in the first place.

Reduce Your Interest Rates

People often turn to second mortgages when they have built up some equity and need access to cash—especially to pay off high-interest debt. Credit cards can charge 20% or more in interest, and personal loans often start around 13%. A second mortgage can offer a much lower rate, and you can avoid breaking your first mortgage and incurring a prepayment penalty.

Reduce Your Interest Payments

With a lower interest rate and a longer amortization period, second mortgages have much lower payments than credit cards, personal loans, and car loans.

For example, $50,000 in credit card debt will cost you about 2.5% of the outstanding balance per month in minimum payments, which is around $1,250 per month. With a home equity loan at 9.99% (currently starts at 6.99%), your payments will be between $400 to $500 per month, saving you almost $9,000 per year in interest payments.

You’re not adding new debt—you’re replacing expensive debt with more affordable debt, backed by the value of your home.

Interest Rates for Second Mortgages in Ontario

The interest rate you’ll pay depends on the type of second mortgage you choose and the lender you work with. Here are two common options in Ontario, each with its own benefits.

A home equity line of credit (HELOC) from B lenders currently starts at 7.49% and works a bit like a credit card. You can borrow money as you need it and only pay interest on the amount you’ve used. HELOCs are great if you want flexibility or expect to borrow money in chunks over time.

A home equity loan from private lenders right now starts at around 6.99% and are often available even if you have bad credit or limited income. Unlike traditional lenders, private lenders focus more on your property’s value than your financial profile.

Both of these options offer rates far below what you’d pay on a credit card or unsecured loan. That’s why using a second mortgage to pay off debt can be such a smart move. Talk to your mortgage broker about finding the product that's most suitable for you.

Work with a Reputable Mortgage Broker

Trying to sort through all these options on your own can be overwhelming. That’s why most people work with a mortgage broker who specializes in second mortgages. A good broker will take time to understand your situation, calculate how much equity you have, and recommend the best product for your needs.

Look for someone with solid experience and positive reviews. A broker acts as your guide—they’ll walk you through the entire process, connect you with the right lender, and make sure you understand the terms before you sign anything. In short, they help take the stress out of the process.

How to Apply for a Second Mortgage in Ontario

Applying for a second mortgage is more straightforward than many people think, especially when you have a broker helping you.

The first step is to get your documents in order. Lenders will want to see your current mortgage statement, your most recent property tax bill, and any statements for debts you plan to pay off. You’ll also need to show proof of income—usually in the form of recent pay stubs, T4s, or bank statements if you're self-employed.

Once the paperwork is gathered, your broker will arrange an appraisal. This is an important step because it determines the current market value of your home, which affects how much you can borrow.

After the appraisal is done, your broker will shop around for the best lender and loan option based on your credit, income, and how much equity you have. If you’re approved, you’ll review and sign the mortgage documents with a lawyer, and then receive your funds. You can use that money to pay off your debt, often through your lawyer or broker, who can help handle the payouts directly.

How Much Can You Borrow with a Second Mortgage?

In Ontario, you can usually borrow up to 80% of your home’s value, minus what you still owe on your first mortgage. Let’s say your home is worth $700,000 and your existing mortgage is $400,000. That means you could potentially borrow up to $160,000 as a second mortgage.

Equity Available for Borrowing = Current Market Value of Home * 0.80 - Outstanding Mortgage Balance

The actual amount will depend on your lender and financial profile, but this gives you a general idea. Your broker will do the math and help you avoid borrowing more than you need or can comfortably repay.

You might be wondering if your credit score will hold you back. The truth is, there are options for almost every credit situation.

Minimum Credit Score for a Second Mortgage

Most B lenders have flexible credit requirements and will work with borrowers with credit scores as low as 550. If your score is below that, don’t panic. Private lenders who offer home equity loans often don’t have any credit score requirements at all. They focus more on your home’s value and how much equity you’ve built up.

Based on our experience, using a second mortgage to pay off your debt will boost your credit score within 90 days of your debts being paid out. The important thing is to improve your spending habits and your credit management to maintain a good credit score going forward.

Borrow Responsibly

Of course, like any financial tool, there are some risks to be aware of—and knowing them upfront can help you avoid trouble later on.

The biggest risk is that your home is on the line. A second mortgage is secured by your property. If you fall behind on payments, the lender could take legal steps to recover what they’re owed, including forcing the sale of your home.

This is why it’s so important to borrow responsibly. Don’t take out more than you need, and make sure the new monthly payments fit your budget. Your broker can help you calculate this before you move forward.

Pay Off Debt with a Second Mortgage vs. Refinancing

When you’re looking to access equity from your home to pay off debt, you’re likely choosing between two options: refinancing your current mortgage or taking out a second mortgage. Both can get you the funds you need—but which one makes more sense often comes down to timing.

If your current mortgage is locked into a term and the maturity date is still more than a year away, refinancing may trigger a prepayment penalty. Depending on your lender and rate type, that penalty can run into the thousands—wiping out any savings you’d gain from consolidating your debt.

In this case, a second mortgage is often the smarter move. It allows you to borrow against your home equity without touching your existing mortgage, which means no penalty, no disruption to your low first-mortgage rate, and a simpler overall process.

On the other hand, if your mortgage term is close to maturity—say, within a few months—it might be worth waiting and combining everything into a full refinance, especially if you’re planning to borrow a larger amount or want a clean slate with a new lender.

Every situation is different, so before making a decision, speak with an experienced mortgage broker. They’ll calculate the true cost of each option—including interest savings, penalty fees, and setup costs—and help you choose the one that makes the most sense long term.

Getting a Second Mortgage to Pay Off Debt

Using a second mortgage to pay off high-interest debt is a practical solution for many Ontario homeowners. Second mortgages typically offer lower interest rates than credit cards or personal loans, making them ideal for debt consolidation. Options include second mortgages from B lenders, home equity loans from private lenders, and HELOCs—all with varying rates, terms, and credit requirements.

You can usually borrow up to 80% of your home’s value (minus your current mortgage), and even homeowners with low credit scores may qualify. Choosing between a second mortgage and refinancing often comes down to timing—if your current mortgage has more than a year left, a second mortgage can help you avoid prepayment penalties.

While second mortgages offer flexibility and relief, they also come with risks, like using your home as collateral. It's essential to borrow responsibly and have a long-term plan to stay out of debt. A qualified broker can help you navigate your options and find the best strategy for your financial goals.