When your mortgage comes up for renewal, it’s easy to sign the lender’s offer—especially when it includes a lower rate than before. But if you're carrying high-interest debt, that lower rate might still be costing you tens of thousands of dollars.

Let’s compare renewing at 4.09% vs. refinancing at 4.44%, using a real-world scenario with credit card, loan, and line of credit debt on the books.

Meet Sarah: Mortgage Renewal + High-Interest Debt

• Current mortgage balance: $400,000
• Renewal offer from current lender: 4.09% fixed for 5 years
• Alternative refinance rate with new lender: 4.44% fixed for 5 years
• Other debts: $20,000 line of credit @ 9.50% $15,000 credit card @ 19.99% $15,000 car loan @ 7.99%
• Goal: Lower her total monthly obligations and reduce interest cost over time

Scenario 1: Renew at 4.09%, Keep Debts Separate

Sarah renews her $400,000 mortgage into a new 5-year term at 4.09%.

Mortgage Payment (25-year amortization): ~$2,123/month

Separate monthly debt obligations:

• Line of credit: ~$400
• Credit card (minimums + interest): ~$450
• Car loan: ~$475 Total non-mortgage debt payments: ~$1,325/month

Total Monthly Outflow: $2,123 + $1,325 = $3,448/month

5-Year Total Cost Estimate:

• Mortgage payments: $2,123 × 60 = $127,380
• High-interest debt payments: ~$79,500 (assumes slow repayment with significant interest over time)

Total Paid Over 5 Years: ≈ $206,880

Scenario 2: Refinance + Consolidate at 4.44%

Sarah refinances with a new lender, rolls the $50,000 debt into her mortgage, and secures a slightly higher rate at 4.44%.

New mortgage amount: $400,000 + $50,000 = $450,000 New mortgage payment (25-year amortization): ~$2,475/month

No more line of credit, credit card, or car loan payments.

Total Monthly Outflow: $2,475/month all-in

5-Year Total Cost Estimate:

• Mortgage payments: $2,475 × 60 = $148,500

Total Paid Over 5 Years: ≈ $148,500

Summary of Results

Key Takeaways

Even though Sarah’s refinance rate is 0.35% higher, she still comes out over $58,000 ahead over 5 years — with nearly $1,000 in monthly cash flow relief. That’s because mortgage debt is vastly cheaper than credit card, car loan, or unsecured credit.

Other Benefits of Refinancing and Consolidating

• One simple payment instead of juggling multiple lenders.
• Improved cash flow allows for emergency savings or investing.
• Stress-free debt repayment — no more aggressive credit card rates.
• Better credit utilization, potentially improving her credit score.

When Does Refinancing Make Sense?

Refinancing to consolidate debt makes the most sense when:

• You have $25K+ in high-interest debt
• Your mortgage is up for renewal (no penalty)
• Your home value has increased (so there’s equity to borrow against)
• You want to improve monthly cash flow or reduce financial stress

Even with a slightly higher interest rate on the mortgage, the interest savings and simplified payments often outweigh the rate difference.

What to Watch For

• Refinancing before maturity can trigger a break penalty (unless you're renewing).
• Extending your amortization could increase interest costs long-term—though this can be mitigated with prepayments or accelerated schedules.
• Always consider total cost, not just rate.

Conclusion

Sarah’s situation is not unusual. Many Canadians carry high-interest debt without realizing the power of a mortgage refinance. The key isn’t just getting the lowest mortgage rate — it’s optimizing your entire balance sheet.

Renewing at a slightly lower rate might feel like the “safe” option—but if you’re carrying high-interest debt, refinancing can dramatically reduce your overall payments, interest, and financial stress.

If you’re in a similar situation, reach out so we can run the numbers. A 30-minute conversation could lead to a 5-year savings of $40,000–$60,000+.