As a homeowner starts to pay down their mortgage throughout the years, they begin building home equity. The more they pay toward their mortgage, the more home equity they gain for future use. Your equity will also rise if and when your property increases in value with the fluctuating housing market.

Many homeowners choose to use their equity to finance something important, especially in times of uncertainty such as during the COVID-19 pandemic. That particular expense might be anything from a large addition to their house, paying off their existing car loan, or consolidating credit card debt. Whatever that cost might be, a home equity loan can be used to help pay it down.

How much home equity do I have?

If you’ve been paying off your mortgage for several years, then you likely have at least some home equity. As we explained above, you build equity as you pay down your mortgage. If you decide to use your home equity to take out a home equity loan, you’ll need to have your house appraised to determine its market.
If you’re simply curious about how much equity you have or want a general idea of how much equity you have before you head to your lender, below is how you can do a quick estimate of your own. Note the figures might not be the exact amount you can qualify for, as other minor metrics such as your debt ratio and annual income can also play a part.

Home value = $376,000
80% of value ($376,000 x 0.8) = $300,800
Outstanding mortgage = $232,000
80% of your home’s value – Outstanding mortgage = $68,800 of eligible funds to be borrowed

Note, this equation does not show you the rate, which is relative to the Bank Rate offered by major Canadian banks. Keep in mind that the number you’ll get from the above equation is just an estimate as you’ll only truly know the current value of your house when you get it appraised.

When should you consider a home equity loan:

  • Home renovations
  • Home improvements or extensions
  • Debt consolidation (if you have credit card debt or debts of a higher rate)
  • A new car
  • School expenses
  • For your business


How Do I Gain Access to My Home Equity?

Homeowners can use these traditional methods to access their home equity:

  • Home Equity Loans
  • Cash-Out Refinancing
  • Second Mortgage
  • Home Equity Loans

The ideal method for you will depend on your needs. We have an article on our blog that discusses the difference between each loan type, and which loan type works best for you. If you have any questions about how to take equity out of your home, or which loan type is most ideal for you, feel free to reach out to us with any questions. Our specialists are always happy to help!