Credit card bills roll in, resolutions are fresh, and homeowners are ready to face their finances head-on. What many of them don’t realize is that this month also brings a unique opportunity.
Thanks to lender momentum, consumer motivation, and a post-holiday debt surge, January often shapes up to be the most strategic time of year to use a second mortgage to consolidate unsecured debt.
Here’s why.
What makes January ideal for debt consolidation with a second mortgage?
Every year, we see the same pattern. Once the festive season wraps up and the Visa bills arrive, reality sets in. But this year, the pressure is even greater.
We are heading into a year of heavy mortgage renewals. Variable-rate borrowers are already strained, and inflation fatigue is real. Many homeowners have been limping along tapping into credit card debt to stay afloat until their next mortgage renewal. They are looking for quick, effective ways to take control of their cash flow.
Second mortgages, especially in today’s equity-rich environment, offer a practical solution for many Canadians; particularly those who may not qualify for a Home Equity Line of Credit.
Why demand spikes right now
- Holiday spending has maxed out credit cards and lines of credit
- Homeowners are setting financial goals and looking for action, not theory
- Upcoming renewals in 2026 are prompting people to improve debt ratios early
- Many self-employed clients are planning their cash flow and taxes for Q1
- Credit utilization has spiked, pushing scores down and tightening financing options
January is when motivation is high and the numbers make sense. For many, it is the one time of year where mindset and opportunity align.
Why second mortgage offers are competitive in January
Here’s something not all consumers realize: lenders are also more active in January.
Private and alternative lenders have capital to deploy, and the strongest deals of the year often happen now. That can mean better rates, more flexible terms, and faster approvals for homeowners who act early.
What lenders want to see
- A strong equity position, usually below 75% loan-to-value. The lower the LTV, the better the terms
- Urban or marketable properties with a clear exit strategy
- Reasonable overall credit behaviour, even with a low score
- Interest-only payment preferences to manage cash flow
- Clients who understand the short-term nature of the product
And here’s a common misconception we should clear up: you do not need a high credit score to qualify for a second mortgage.
In fact, we have successfully arranged second mortgages for clients with scores in the 500s. When there is sufficient equity and the property is solid, many lenders focus more on the security and the strategy than a specific credit score.
That said, not all lenders take this view — especially those with little appetite for enforcement if a borrower cannot make their payments. Knowing your lender’s risk tolerance is critical.
How second mortgages unlock immediate cash flow relief
The interest rate on a second mortgage is higher than on a traditional mortgage. But when compared to unsecured debt, the numbers often speak for themselves.
We recently helped a client consolidate $70,000 in credit cards and a $28,000 car loan. Before consolidation, they were paying over $2,500 a month across six different payments.
With a $110,000 second mortgage at 9%, interest-only, we brought that monthly outlay down to just $825.
That is a savings of over $1,600 per month. Their credit score also began improving immediately as their utilization dropped.
Benefits of second mortgage debt consolidation
- Lower monthly payments that free up cash
- Simpler financial management with one payment instead of many
- Improved credit scores as utilization decreases
- Faster approval timelines than refinancing
- No need to break a low-rate first mortgage
For homeowners still sitting on a 2% to 3% first mortgage, second mortgages allow them to preserve those rates while still cleaning up high-interest debt. Some lenders will even allow you to align the maturity date of your second mortgage with the term of your first.
Who is a good candidate for a second mortgage this January?
Second mortgages are not just for people in trouble. In fact, many of the best candidates are financially responsible homeowners who are simply boxed out of conventional lending due to timing, income type, or short-term debt pressure.
You may be a fit if…
- You have at least 25% equity in your home
- Your credit score is low but you have a solid explanation
- You are juggling multiple payments, and only making the minimums
- You are self-employed and cannot qualify with a bank right now
- Your mortgage is renewing in 2026 or 2027 and your debt service ratios need improvement
The approval decision is based on the full picture, not just one number. If you have equity and a clear plan, a second mortgage is absolutely worth considering.
What to watch out for when using a second mortgage
Second mortgages can be a lifeline when used strategically, but they are not inexpensive.
I never want a client blindsided by the costs. This is a short-term solution designed to solve a problem, but it comes with its own price tag. Homeowners deserve to understand exactly what that looks like before signing anything.
What every homeowner should understand about the costs
- Interest rates typically range from 8.99% to 13.99%, depending on the property, equity, and borrower profile
- Lender fees are common and often range from 1% to 2.5% of the loan amount
- Brokerage fees are also charged and are paid from the loan proceeds. These are disclosed in advance and regulated
- Legal fees are paid twice in most second mortgage transactions. Borrowers must typically cover both their own independent legal counsel and the lender’s legal costs
- In Ontario, loans under $75,000 may allow a waiver of independent legal representation, but this depends on the lender. For example, some institutional and MIC lenders still require two separate lawyers regardless of loan size. Borrowers should always confirm this early in the process to avoid surprises
- Appraisal fees are almost always required upfront to determine the current market value of the property
- Renewal fees can apply if the mortgage extends past the original term
These expenses are manageable and often worthwhile, but only when they are part of a larger plan. That is why we always build a clear exit strategy before moving forward. If someone cannot qualify for a refinance in 12 to 18 months, or if they have no intention of addressing the underlying issues, a second mortgage may not be the right move.
Bottom line: January can be the smart month to consolidate using a second mortgage
For homeowners feeling the weight of December’s debt, now is the time to act.
With credit card rates around 21%, second mortgages starting near 9% offer immediate monthly savings and long-term benefits to your credit profile. And lenders are ready to lend.
If you are thinking about debt consolidation, January gives you the best chance at a clean slate. Do it right, and you can walk into your next mortgage renewal with stronger ratios, better credit, and far less stress.
It all starts with equity. The sooner you explore your options, the more choices you may have.
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Last modified: December 16, 2025
