7 July 2025 By: Sunlite Mortgage

When Interest Rates Double, Debt Consolidation Becomes a Financial Lifeline

Between 2019 and 2025, Canadian mortgage holders experienced a rapid rise in interest rates. If you’re carrying high-interest debt, a smart debt consolidation and refinancing plan could help you reduce monthly payments, regain control of your finances, and improve your credit profile. How to Increase Your Credit Score by Using the Right Debt Consolidation Strategy.

Anyone with a mortgage renewing today will see a significant increase in their mortgage payment. If they also carry unsecured debt, they may benefit from including those balances in a mortgage refinance to reduce their monthly payments and improve their long-term financial health.

Darren and Ashley are both professionals in the IT field, in their late thirties, and parents to a young child. They’ve owned their Ontario home for five years and, like many Canadians, found themselves facing rising interest rates and increasing monthly payments — all while planning for their next financial move.

      Client Snapshot

• Ontario homeowners
• Mortgage balance: $480,000
• Household income: $160,000/year
• Credit score before: 650/670 → after: 710/730
• Investment goal: Acquire 2nd property within 12 months

      From Mortgage Renewal Stress to Strategic Refinance Success

One of our clients, whom we originally placed with TD five years ago, recently received their mortgage renewal notice. TD offered a rate of 4.79% — a sharp increase from their original 2.39% rate. Like nearly 60% of Canadians, they were about to sign and return the renewal notice when they received one of our newsletters offering to shop their renewal.

This family had accumulated over $120,000 in debt across credit cards, car loans, personal loans, property and income tax arrears, with interest rates ranging from 9.99% to 22%, and a combined monthly payment of $3,970. They needed a debt consolidation strategy.

Their goals were clear:

• Reduce their monthly payment
• Secure a lower mortgage rate than the renewal offer
• Avoid taking out a second mortgage
• Get access to funds to support the purchase of an investment property

Initially, they believed a second mortgage would be necessary, as they didn’t think they would qualify for the full amount they needed. However, after a detailed review of their income and documents, their Sunlite Mortgage agent discovered they did qualify — not only for the full refinance but also for a HELOC (Home Equity Line of Credit) that could serve as the down payment on their next property. However, their Sunlite Mortgage agent asked the right questions to uncover a more strategic solution — one that not only helped them qualify for a full refinance but also set them up for future investment success. If they had accepted the renewal, they would have missed out on consolidating their high-interest debts, reducing monthly payments, and securing a HELOC. That would have made their investment property more expensive to acquire — they would have needed a separate loan or private financing for the down payment, likely at higher rates with additional fees.

The Solution: A Strategic Refinance With Sunlite Mortgage

Instead of blindly renewing at 4.79%, they contacted Sunlite Mortgage for advice. Thanks to our high-volume relationship with TD, we were able to secure a rate of 4.39% for them and structure a strategic refinance.

Rather than choosing a product off the shelf, their Sunlite Mortgage agent designed a tailored debt consolidation strategy — combining a refinance and HELOC — that aligned with the client’s long-term investment goals and provided immediate financial relief.

Due to the volume of business Sunlite Mortgage conducts with TD, our clients often receive access to preferred mortgage rates that aren’t typically advertised. These rate improvements can make a significant difference, especially when paired with a complete financial strategy.

We helped them:

• Refinance their mortgage with their preferred lender, TD, at a lower rate
• Consolidate $120K in high-interest debt using home equity
• Eliminate multiple loan and credit card payments
• Avoid the need for a second mortgage or private loan
• Qualify for a HELOC to fund their future investment
• Improve their credit score by reducing credit utilization

Most importantly, by completing a debt consolidation strategy and eliminating $3,970 in monthly loan and credit card payments, they were able to reduce monthly payments and redirect that cash flow into a savings plan, helping build:

• An emergency fund for unexpected costs
• Additional RRSP or TFSA contributions
• Capital toward their upcoming investment property purchase

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Their Options Before Working With Sunlite

Why a HELOC Was the Right Fit for Their Next Move

The family planned to purchase an investment property within the year. A traditional 5-year fixed-rate mortgage wouldn’t offer the flexibility they needed, so we helped them secure a TD Home Equity FlexLine (HELOC).

A HELOC (Home Equity Line of Credit) offers:

• Access to funds as needed
• Interest-only payments on used balances
• Flexibility to invest, renovate, or consolidate again

Not all mortgage lenders offer HELOCs. Working with a broker who understands the benefits of flexible financing helped this client align their mortgage with their long-term investment goals.

 Why Refinancing at Renewal Makes Sense

• No prepayment penalty
• Legal costs are often lower
• Easier qualification window
• Time to restructure debt and add flexibility
• You can still stay with your preferred lender

 5 Personal Finance Lessons From a Smart Debt Consolidation Strategy

 Why a 60-Point Credit Boost Matters

• Better access to ‘A’ lenders on future deals
• Lower rates
• Stronger borrowing power for investment property
• Avoids default risk categories

1. Look at Total Monthly Payments — Not Just the Rate
   A lower interest rate doesn’t always mean a lower financial burden. Focusing on the total cost of all monthly obligations is key to managing your budget effectively.
2. Use Home Equity Wisely
   Home equity can be a powerful tool when used strategically, such as paying off high-interest debt, investing in property, or building savings. The key is aligning it with your financial goals.
3. Credit Utilization Impacts Your Score
   Lowering your credit utilization by completing a debt consolidation plan can lead to a significant improvement in your credit score, sometimes by dozens of points.
4. Work With a Mortgage Strategist
   The right advisor can help you build a plan that fits your life, not just a rate. A strategic refinance considers your goals, not just your renewal date.
5. Act Before Your Renewal Date
   Being proactive gives you options. Refinancing early — even with a prepayment penalty — can often produce better long-term outcomes.Begin reviewing your mortgage renewal options at least 120 days before your renewal date. This allows time to explore alternative lenders, consolidate debt if needed, and reduce monthly payments through a well-structured plan.

The Bottom Line: You Have More Power Than You Think

When mortgage rates rise and unsecured debt becomes unmanageable, it can feel overwhelming. But that stress can also signal an opportunity — if you have the proper guidance.

In this case, the family’s Sunlite Mortgage agent asked the right questions, taking time to understand their financial goals beyond the renewal letter. By digging deeper, they discovered a debt consolidation strategy that avoided a costly second mortgage, consolidated their debt, and unlocked equity through a refinance and a HELOC — all while preserving their relationship with their preferred lender.

Had they signed the bank’s renewal, they would’ve lost the chance to consolidate debt at a lower rate, missed out on qualifying for a HELOC, and faced higher borrowing costs for their investment property. Instead, a smart refinance reduced their monthly obligations and positioned them to grow — with lower risk and more flexibility.

At Sunlite Mortgage, we specialize in helping clients across Canada turn rising mortgage payments and unsecured debt into an opportunity for financial renewal. Through smart debt consolidation, personalized refinance strategies, and access to HELOCs, we help clients reduce monthly payments, rebuild credit, and create pathways to long-term financial growth.

📞 Let’s Talk Before You Renew

Our mortgage advisors will walk you through your refinance and offer a debt consolidation strategy based on your needs — no pressure, no fees, just honest guidance.

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