5 Best Ways to Use Your Home Equity to Build Wealth

At 360Lending, we understand that owning a home in Ontario means more than just having a roof over your head; it means you’ve built a powerful, appreciating asset. Yet, many homeowners feel financially constrained, knowing they have significant equity but aren't sure how to access it smartly or safely.

Do these goals resonate with you?

• Tired of paying punishing interest on credit cards and wish you could combine all your debts?

• Dream of tackling a major renovation that finally boosts your home's value?

• Does an unexpected emergency, like a sudden job loss or major repair, make you feel financially vulnerable?

If you feel like your equity is trapped, leaving your goals or peace of mind just out of reach, you are not alone. Your home equity isn't just a number on a balance sheet; it is untapped cash flow and potential wealth waiting to be put to work for your family.

The core value of this article is to serve as your comprehensive, straightforward guide to strategically leveraging your home equity. We will show you the five best ways to use your equity—from reducing debt to building a safety net—while detailing the current financing options available through 360Lending.

What is Home Equity and Why It's Your Best Tool

Simply put, your home equity is the difference between your home's current market value and the amount you still owe on your mortgage. As your home value increases and you pay down your mortgage principal, your equity grows.

In Canada, you can typically borrow up to 80% of your home’s value to access this equity. The reason this is your best financial tool is simple: cost. When you borrow using your home as security, the interest rates are dramatically lower than nearly every other financing option. Instead of paying 15% to 25% on credit cards or high-rate personal loans, you can access funds at competitive secured mortgage rates.

5 Strategic Ways to Use Your Home Equity

Option 1: Eliminating High-Cost Debt (The Financial Reset)

The most common and often most impactful use of equity is for debt consolidation. This strategy targets and eliminates high-interest, unsecured debts like credit cards, high-rate car loans, and lines of credit. By combining these into a single mortgage payment, which can offer rates as low as 4% to 5% (via a refinance), you save hundreds of dollars a month and thousands in total interest.

Option 2: Home Renovation (Investing in Appreciation)

Many homeowners use equity to invest directly back into their property, which can be one of the smartest wealth-building moves.

High-Value Projects: Focus on renovations like kitchens and bathrooms, which offer the highest return on investment (ROI).

Income Generation: Finishing a basement into a legal secondary unit is a powerful move, as the rental income generated can help offset the cost of the mortgage itself.

Option 3: Business Investment and Income

As an Ontario business owner, having access to capital for your business can be challenging and expensive. Home equity provides an injection of low-cost capital to fuel growth.

Fueling Growth: Use the funds for startup costs, essential equipment upgrades, or an aggressive marketing push.

Low-Cost Capital: By tapping equity at competitive secured rates, you are using a secure asset to pursue high-return business opportunities.

Option 4: Financing Major Purchases

Life often presents major, necessary expenses. Using home equity is the most financially disciplined path compared to high-interest personal loans.

Higher Education: Fund university tuition for your children, which often requires large, structured payments over several years.

Major Assets: Finance the purchase of a vehicle or investment property with a clear repayment schedule and competitive interest rates.

Option 5: Building a Financial Safety Net

For families, having readily available cash for emergencies is critical. Unexpected events like a sudden job loss or essential, unforeseen home maintenance can quickly derail a family's budget.

Many homeowners opt to set up a Home Equity Line of Credit (HELOC) or a Home Equity Loan as their backup emergency fund.

HELOC Advantage: A HELOC (starting at 7.49%) is ideal because you apply for it now while your finances are strong. Once approved, the credit line is registered on your home, and it costs you nothing until you actually use it. If an emergency strikes, the funds are instantly available at a low rate.

Peace of Mind: This allows you to optimize your regular savings (e.g., invest more aggressively) while knowing you have a large, low-cost financial safety net ready.

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How to Access Your Home Equity

At 360Lending, we tailor the best fit for your goals and current financial picture. The three main tools available to homeowners are:

1. Cash-Out Refinance (The Lowest Rate Option)

You replace your existing mortgage with a new, larger one, and receive the extra funds as cash.

Current Rate Advantage: Provides the lowest rate, currently in the 4% to 5% range.

Best For: Debt consolidation or major funding needs where you seek the absolute lowest interest cost.

2. Home Equity Line of Credit (HELOC)

A flexible, revolving line of credit secured by your home. You only pay interest on the money you use.

Current HELOC rates start from 7.49%.

Best For: Emergency funds, ongoing cash flow management, or renovations where you need access to funds over time.

3. Home Equity Loan (Second Mortgage)

A separate, lump-sum loan registered behind your first mortgage with a fixed rate and set repayment schedule.

Current home equity loan rates start from 7.99%.

Best For: Homeowners who have a low-rate first mortgage they do not want to break, but need a specific, fixed amount of cash immediately.

Important Considerations for Using Home Equity

While leveraging your home equity is a powerful financial move, it is crucial to understand the risks involved. Since your home is used as collateral, the stakes are high.

Your Home is Collateral: The most critical consideration is that any home equity financing—whether a Refinance, HELOC, or Home Equity Loan—is secured by your property. If you fail to make payments, your home is at risk of foreclosure.

Costs of Breaking a Mortgage: If you choose the Refinance option, you will likely incur a prepayment penalty from your current lender, as well as legal and appraisal fees. We always run the numbers to ensure the long-term benefit outweighs these upfront costs.

Variable Rate Risk (HELOCs): Some HELOCs come with variable interest rates. If the Bank of Canada raises its prime rate, your monthly interest payment on the HELOC will increase immediately, potentially stressing your budget if you carry a large balance.

The Risk of Over-Leveraging: If you borrow the maximum amount possible and your home value were to drop (in a market downturn), you could potentially owe more than your home is worth, limiting your options if you needed to sell or refinance later.

The Importance of Good Financial Habits: When using equity for debt consolidation, you must commit to not using the old credit accounts again. This reset is only successful if you adopt strong financial discipline moving forward.

Ready to Unlock Your Home’s Equity?

You've built the equity. Now it’s time to put it to work. At 360Lending, we provide a clear, strategic path to help you achieve your most important financial and life goals.

Don’t let your goals stay out of reach. Find out exactly how much you can borrow and what your new, low monthly payment could be.

Visit our home equity loan product page to:

See how much can you borrow: A calculation of the maximum equity you can access.

Estimate your monthly savings: A side-by-side comparison showing exactly how much cash flow your consolidation plan will free up.

Connect with a broker: Schedule a call with our team to get approved within 24 hours.

Take the first step toward putting your home’s value to work for you.

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