Consolidating Debt: Exploring the Option of Adding Debt to a New Mortgage

October 6, 2023

Can you add debt to a new mortgage?

When it comes to managing your finances, finding ways to consolidate debt and streamline your payments can be a smart move. One option that may come to mind is adding your existing debt to a new mortgage. This can seem like an appealing idea, as it allows you to consolidate your mortgage and other debts into a single monthly payment. But before you consider adding debt to a new mortgage, it’s important to understand the implications and potential risks involved. In this article, we’ll explore the concept of adding debt to a new mortgage and provide you with the information you need to make an informed decision.

Understanding Debt Consolidation

Debt consolidation is the process of combining multiple debts into one. By consolidating your debts, you can simplify your finances and potentially lower your overall interest rates and monthly payments. There are several methods of debt consolidation, and adding debt to a new mortgage is one of them.
When you add debt to a new mortgage, you are essentially refinancing your existing mortgage and borrowing additional funds to pay off your other debt. The total amount of your new mortgage will include both your existing mortgage balance and the additional debt you want to consolidate. This allows you to pay off your high-interest debts, such as credit card balances or personal loans, with the lower interest rate typically associated with mortgages.

The pros and cons of adding debt to a new mortgage

Before deciding to add debt to a new mortgage, it’s important to weigh the pros and cons. Here are some key points to consider:


1. Streamlined payments: Consolidating your debt into a single monthly payment can make it easier to manage your finances and stay organized.

2. Potential interest savings: By consolidating high-interest debt into a mortgage with a lower interest rate, you may be able to save money on interest payments over time.


1. Extended repayment period: Adding debt to a new mortgage means extending the repayment period for your consolidated debt. While this may result in lower monthly payments, it also means paying more interest in the long run.
2. Increased overall debt: Consolidating debt into your mortgage means increasing your overall mortgage balance. This can affect your home equity and make it more difficult to build equity in your property.

Factors to Consider Before Adding Debt to a New Mortgage

Before adding debt to a new mortgage, it’s important to evaluate your financial situation and consider the following factors:

1. Interest rates: Compare the interest rates on your existing debt with the interest rate on your mortgage. Make sure the potential interest savings outweigh the costs associated with refinancing.

2. Closing Costs: Refinancing your mortgage incurs closing costs, which can include appraisal fees, attorney fees and loan origination fees. Consider these costs and include them in your financial calculations.

3. Affordability: Determine whether you can comfortably afford the new mortgage payment, including the additional debt. Review your income, expenses and budget to ensure that the consolidated payment is manageable.

Alternatives to Adding Debt to a New Mortgage

Adding debt to a new mortgage is not the only option for debt consolidation. Depending on your financial situation, you may want to consider the following alternatives:

1. Personal loan: If the amount of debt you need to consolidate is relatively small, a personal loan may be a viable option. Personal loans often have shorter repayment terms than mortgages, allowing you to pay off your debt more quickly.

2. Balance transfer: If your consolidated debt consists primarily of credit card balances, transferring those balances to a credit card with a low or 0% introductory APR can provide temporary relief from high interest rates. However, be aware of balance transfer fees and the duration of the promotional rate.

3. Debt management plan: Enrolling in a debt management plan through a reputable credit counseling agency can help you consolidate and pay off your debt. These plans typically involve negotiating lower interest rates and creating a structured repayment plan.

Bottom line

Adding debt to a new mortgage can be a viable option for debt consolidation, but it’s important to carefully evaluate the pros and cons before making a decision. Consider your financial goals, interest rates, closing costs and affordability. It’s also worth exploring alternative methods of debt consolidation to determine which approach best suits your financial situation. Consulting with a financial advisor or mortgage professional can provide valuable guidance and help you make an informed decision. Remember, debt consolidation is a financial strategy that should be approached with careful consideration and understanding of your personal circumstances.


Can you add debt to a new mortgage?

Yes, it is possible to add debt to a new mortgage through a process called “cash-out refinancing.” This allows you to refinance your existing mortgage and borrow additional money against the equity you have built in your home. The additional funds can be used to pay off existing debts, such as credit card balances, student loans, or medical bills.

What are the benefits of adding debt to a new mortgage?

Adding debt to a new mortgage can have several benefits. First, mortgage interest rates are often lower than other types of debt, such as credit cards or personal loans. By consolidating your debts into a new mortgage, you may be able to lower your overall interest rate and reduce your monthly payments. Additionally, having a single monthly payment can make managing your finances simpler and more convenient.

Are there any risks or drawbacks to adding debt to a new mortgage?

Yes, there are risks and drawbacks to consider when adding debt to a new mortgage. One of the main risks is that you are essentially converting unsecured debts (like credit card debt) into secured debt (your mortgage). If you are unable to make the mortgage payments in the future, you could potentially lose your home through foreclosure. It’s also important to consider the long-term cost of borrowing. By extending the repayment period, you may end up paying more in interest over time, even if the monthly payments are lower.

How much debt can you add to a new mortgage?

The amount of debt you can add to a new mortgage will depend on several factors, including the value of your home, your creditworthiness, and the lender’s policies. Generally, lenders will allow you to borrow up to a certain percentage of your home’s appraised value, commonly known as the loan-to-value (LTV) ratio. The specific LTV ratio allowed may vary, but it’s typically around 80% to 85%. Keep in mind that adding too much debt to your mortgage could affect your ability to qualify for the loan.

What is the process for adding debt to a new mortgage?

The process for adding debt to a new mortgage typically involves the following steps:

Assess your financial situation and determine if adding debt to your mortgage is a suitable option.

Research and compare mortgage lenders to find the best terms and rates.

Apply for a mortgage refinance and provide the necessary documentation, such as income verification and property appraisal.

Work with the lender to determine the amount of debt you can add to the new mortgage.

If approved, complete the refinance process and use the funds to pay off your existing debts.

Begin making monthly mortgage payments, which will include the added debt amount.

Can you add any type of debt to a new mortgage?

In general, you can add various types of debt to a new mortgage through cash-out refinancing. This can include credit card debt, personal loans, medical bills, student loans, and other unsecured debts. However, it’s important to note that some lenders may have restrictions on the types of debts that can be consolidated into a mortgage. Additionally, it’s crucial to carefully consider the interest rates, terms, and overall cost of the new mortgage before deciding to add any particular type of debt.