Debt Challenges

To qualify for a mortgage loan, your debts relative to income need to be managable. Too much debt increases the risk dramatically that you will default on your loan.  Too much debt may prevent you from getting a mortgage in the first place.

Dealing with Debt

Buying on credit and taking out loans have become commonplace, but consumers who spend beyond their means can end up with an unmanageable debt load, and put themselves at great financial risk.

As it relates to getting a mortgage, debt can hit you three ways, making the prospect of getting a mortgage seem impossible. Here's why:

  1. Money toward the interest component of debt repayment takes away from your ability to save for a down payment.
  2. If you have any debt repayment difficulties (late payments, collections, etc.), you risk harming your valuable credit rating, which can take years to repair.
  3. The Government of Canada through mortgage lenders enforces how much monthly debt payments you can have relative to your income. Too much consumer (bad) debt reduces the headroom you have to take on additional (good) debt to buy a house, either limiting what you can borrow or shutting you out of the real estate market completely.

Dealing with debt can often seem like an impossible task.

dealing with debt for a mortgage

When you decide to tackle your debt, it is important to have a plan that will work for you. If going into debt has harmed your credit rating, you also need to take action to rebuild your credit. A poor credit rating will affect your ability to qualify for a mortgage to buy your own home.

The task before you is simple, though perhaps not easy. There are two parts:

  1. Resolve and Create a Plan to be Debt- Free: Analyze your debt situation and consider ways to get out of debt
  2. Rebuild your Credit: Focus on using credit responsibly and building a good credit history and score. More info.

Your Plan to be Debt Free

Deciding to tackle your debt can seem overwhelming. The first step is to make the decision to be debt-free; the next step is to identify a plan to get there.

List your debts: the reality check

Create a list of all your debts. As scary as this step may seem, it is important to realize the total amount you owe. For each debt, list the total amount owing, the minimum monthly payment and the interest rate. Your list could include:

  • mortgage(s)
  • credit card balance(s)
  • cash advances
  • line of credit balance(s)
  • payday loans
  • taxes owed
  • buy-now-and–pay-later balance(s)
  • unpaid bills (cell phone, hydro, etc)
  • personal loans

How much is your debt costing you?

Part of managing your debt is understanding how you got there. When you made a purchase in the past, did you consider the total cost of the item? If you could not pay for the purchase in cash and needed to borrow money, the total cost was probably higher than the sticker price.


To figure out how long it will take you to pay off your credit card balance, try FCAC’s Credit Card Payment Calculator Tool. This tool shows you how long it would take you to pay off your credit card balance if you only made the minimum payments, as well as options to pay off your credit card faster and pay less interest.

Decide on a strategy

The types of debt you have and the amount of that debt will affect the strategy you choose to try to pay it off. You may choose to tackle your debt by yourself, or get help by using a third party, such as a reputable credit counselor. No matter what strategy you choose, make sure the plan is achievable and realistic. 

More Resources

Tips for Dealing with a Debt Collector

Debt Consolidation Personal Loan

How to Beat that Debt

Managing Debt: Getting Help from a Credit Counselling Agency - Please note that any action with Credit Counselling, Consumer Proposal, or Bankruptcy will appear on your credit report and will impact your ability to mortgage qualify.

Making a Budget and Sticking to It.

Financial Tools and Calculators

Understanding Your Credit Score and Credit Report

Mortgage Credit Repair

Can You Mortgage Qualify?


Please note: Some of this material is a reproduction of an official work that is published by the Government of Canada. This reproduction has not been produced in affiliation with, or with the endorsement of the Government of Canada.


As licensed professional mortgage brokers, we know exactly what it takes to qualify you for a mortgage and we do more than just get you a great mortgage at a great rate, we will show you the way, too.

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