Should you put a car loan, installment loan or line of credit into your mortgage? Ontario rules, a worked example, and the depreciation trap to avoid.
Quick answer: Folding a high-rate car loan, installment loan or line of credit into your mortgage can free up a lot of monthly cash flow and often helps you qualify, because those payments weigh heavily in lenders' debt ratios. Low-rate promotional car loans usually aren't worth it, and you should keep paying the old amount so you aren't still paying for the car in 25 years.
Car payments and personal loans are fixed monthly bills that sit on your budget for years, and the rates vary enormously: from 0% dealer promotions to online installment loans near Canada's 35% legal limit.
That spread is why this decision is loan by loan. Here is which loans are worth consolidating, how lenders treat them, and a worked example.
A car loan is usually paid off in five to seven years. Rolled into a 25-year mortgage, the same car can still be on your balance long after it's been traded in — and the next car often comes with its own loan.
The fix is simple: once the loan is in the mortgage, keep paying roughly what the car used to cost as a mortgage prepayment, or into savings for the next car. The worked example below shows how quickly that clears the amount you added.
Instalment payments count in your total debt service ratio — the share of income going to housing plus all other debts. Insured mortgages cap it at 44%, and most lenders work to similar limits. Paying out a $600 car payment can be what turns a decline into an approval.
A financed car is registered as security under Ontario's Personal Property Security Act. When your lawyer pays the loan out on closing, the lender discharges that registration. A lease works differently: buying it out is possible, but it's often not worth folding into a mortgage.
A family in Innisfil owes $300,000 at 4.5% with 15 years left. They also carry a $28,000 car loan, a $12,000 online installment loan and a $15,000 line of credit, and they consolidate at renewal.
| Today | Balance | Rate | Monthly |
|---|---|---|---|
| Mortgage (15 years left) | $300,000 | 4.5% | $2,289 |
| Car loan (60 months left) | $28,000 | 8.99% | $581 |
| Online installment loan (36 months left) | $12,000 | 29.9% | $509 |
| Unsecured line of credit | $15,000 | 9.95% | $300 |
| Total monthly today | $3,679 |
Costs added to the new mortgage: Legal and appraisal (estimate) $1,500. New mortgage: $356,500 at 4.5% (illustrative rate, not a quote).
Rates in this example are illustrations, not quotes. Payments use Canadian mortgage maths (interest compounded semi-annually).
Lenders generally let your total mortgage reach 80% of your home's value when you refinance. Using the MLS® Home Price Index benchmark for a typical home from the Toronto Regional Real Estate Board's August 2026 report:
| Area | Typical home (benchmark) | 80% of value |
|---|---|---|
| Simcoe County (all areas) | $775,100 | $620,080 |
| Barrie | $624,700 | $499,760 |
| Orillia | $504,600 | $403,680 |
| Innisfil | $666,400 | $533,120 |
| New Tecumseth | $761,400 | $609,120 |
| Bradford | $958,400 | $766,720 |
| Collingwood | $625,000 | $500,000 |
| Wasaga Beach | $590,000 | $472,000 |
| Midland | $489,600 | $391,680 |
Subtract what you owe to see your approximate room. Your own appraisal decides the real number. See the full Simcoe County market report.
Only if the rate is meaningfully higher than your mortgage rate or the payment is stopping you from qualifying — and only if you'll keep paying close to the old amount. A low-rate promotional car loan is usually best left alone.
Yes, and these are often the most valuable to consolidate because of their very high cost. If they've affected your credit, an alternative lender may be the first step before returning to a bank at renewal.
A lease isn't a loan, so there's nothing to pay out unless you buy the vehicle. A buyout can be financed, but it's rarely worth it unless you planned to keep the car anyway.
Often. Instalment payments count in your total debt service ratio, and lenders cap that ratio — 44% for insured mortgages. Removing a car or loan payment can bring you back under the limit.
Not usually, though some lenders ask for it to be closed or the limit reduced. An open line with a zero balance is only a problem if it gets used again.
More: How bad-credit approvals work in Ontario, The mortgage stress test explained, Debt consolidation calculator, Refinance break-even calculator, Simcoe County market stats (updated monthly).
Written by the TMC Greater Simcoe mortgage team, Orillia, Ontario. Last updated 2026-10-20. General information, not personal financial, tax or insolvency advice. Book a free consultation: 705-238-1097.