What is a home Equity Loan?
A home equity loan allows Canadian homeowners to borrow against the value they’ve built in their property. It offers fast access to funds with fewer restrictions than traditional bank loans. Typically, you can borrow up to 80% of your home’s appraised value, minus any remaining mortgage balance.
As you pay down your mortgage or as your property value increases, your available equity — and your borrowing power — grows. Home equity financing provides a lump sum of cash that can be used for major expenses like renovations, debt consolidation, education costs, business investments, or life events.
It’s a flexible, affordable solution to unlock your home’s financial po
Benefits
Boost Your Credit Score
A home equity loan in Canada can be an effective way to rebuild or improve your credit. By making regular, on-time payments, you can strengthen your credit profile, increase your score over time, and qualify for better rates on future loans or mortgages.
Borrow more
With a home equity loan in Canada, you can access larger loan amounts compared to unsecured personal loans. Your borrowing power is based on your home’s appraised value and the equity you’ve built, giving you more flexibility and financial freedom.
Access to Equity
Access the equity in your home with fewer restrictions than traditional banks. A home equity loan lets you borrow against your property’s value to fund renovations, consolidate debt, or cover major expenses—quickly and easily.
Lump Sum Payment
A home equity loan offers a lump sum payment upfront, allowing you to access your home’s equity immediately. Use the funds to cover home renovations, debt consolidation, or any large expense—all in one go.
FAQs
Is a home equity loan a second mortgage?
A home equity loan can be a first or second mortgage. It is a type of loan that is secured by your home’s equity. You use your property as collateral, allowing you to borrow against the equity you have built in your home. This includes both home equity loans, which provide a lump sum, and home equity lines of credit (HELOCs), which offer a revolving credit line.
Can you pay off a home equity loan early?
Yes, you can pay off a home equity loan early. Many borrowers choose to do so to reduce the amount of interest paid over the life of the loan. Paying off your home equity loan early can save you money and reduce your overall debt load. However, it’s important to check with your lender for any prepayment penalties or terms that might affect your ability to pay off the loan ahead of schedule.
How can I get started with a home equity loan?
To get started with a home equity loan, begin by evaluating your home’s equity. You can request a home appraisal to determine its current value. Next, gather your financial documents, such as income statements and existing loan details. Contact a lender to discuss your options, apply for the loan, and review the terms before finalizing. A professional advisor can guide you through each step to ensure you make informed decisions.
Are there risks associated with a home equity loan?
Yes, there are risks. The primary risk is that your home is used as collateral. If you fail to make payments, the lender could foreclose on your home. Additionally, taking out a large loan can put you at risk of higher debt levels and may impact your financial stability if your home’s value decreases.