For most homeowners in Ontario, their house is more than just a place to live—it’s also their biggest financial asset. But here’s what a lot of people don’t realize: you don’t need to sell your home to turn it into cash. That’s where home equity comes in.

Whether you’re looking to consolidate debt, fund a renovation, cover education costs, or simply build long-term financial security, understanding how home equity works can be a game-changer.

What Is Home Equity?

Home equity is the difference between your home’s current market value and the balance remaining on your mortgage (and any other secured loans against the property). It’s the portion of your home that you truly own.

Here’s a simple example:

Your home is worth: $800,000

You owe on your mortgage: $500,000

Your home equity is: $300,000

That $300,000 is value you’ve built up—value you could potentially borrow against without selling the home.

How Do You Build Home Equity?

Most homeowners build equity in two ways:

1. Paying Down Your Mortgage

Every time you make a mortgage payment, a portion goes toward reducing your principal (the amount you borrowed). As that principal decreases, your equity goes up.

2. Property Value Increases

If your home’s value rises—whether due to market conditions or smart renovations—your equity grows as well. For example, if your $700,000 home increases in value to $750,000 while your mortgage remains unchanged, you’ve gained an extra $50,000 in equity.

Over time, these two forces—repayment and appreciation—can significantly increase your borrowing power.

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Why Does Home Equity Matter?

Home equity is more than just a number. It’s financial leverage you can use.

Here’s why it’s such a valuable asset:

It can be accessed as cash through refinancing, a HELOC, or a second mortgage.

It offers lower-cost borrowing than credit cards or personal loans.

It can strengthen your overall financial picture, helping with everything from debt consolidation to investing in your future.

And unlike many other forms of credit, borrowing against home equity doesn’t require selling assets or dipping into retirement savings. You’re using something you already own—your home—to help fund life’s big goals.

Ways to Access Your Home Equity in Canada

There are three main ways homeowners in Ontario can tap into their home equity:

1. Mortgage Refinancing

This involves breaking your current mortgage and replacing it with a new one—often at a higher amount—so you can pocket the difference in cash.

For example:

Your home is worth $900,000

You owe $500,000 on your mortgage

80% of your home’s value is $720,000

You could refinance for $720,000, pay off the $500,000, and access $220,000 in equity

Refinancing can be a powerful tool if your mortgage is up for renewal or if you want to roll high-interest debt into a lower-rate loan.

2. Home Equity Line of Credit (HELOC)

A HELOC works like a credit card, but it’s secured by your home. You get access to a revolving credit line—usually up to 65–80% of your home’s value—and you only pay interest on what you actually use.

Great for:

Home renovations

Emergency funds

Tuition or education expenses

Large one-time purchases

The big advantage? Flexibility. You can borrow, repay, and borrow again as needed.

3. Second Mortgage / Home Equity Loan

This is a separate loan on top of your existing mortgage, typically used when refinancing isn’t the best option. It gives you a lump sum of cash, often with fixed terms and fixed interest rates.

Best for:

One-time expenses

Paying off high-interest debt

Borrowers who don’t want to break their first mortgage

When Should You Borrow Against Your Equity?

Accessing home equity isn’t something you do on a whim—but when done strategically, it can unlock major financial advantages.

Common Reasons to Use Home Equity:

Consolidating high-interest debt (like credit cards or unsecured loans)

Home renovations or upgrades that increase your property value

Helping a child with education costs or a down payment

Covering major life expenses like a divorce settlement or medical bill

Investing in another property or business

What’s especially powerful is how it helps with debt consolidation. Many Ontario homeowners are sitting on $100,000+ in equity while carrying $30,000–$50,000 in credit card debt at 20%+ interest. By using home equity to pay off that debt, you can slash your interest rate, simplify your payments, and start rebuilding your credit.

Understanding the Risks of Using Your Equity

Home equity is powerful—but it’s not without risk. Here are a few things to keep in mind:

1. It’s Secured by Your Home

That means if you fall behind on payments—whether it’s a refinance, HELOC, or second mortgage—you’re putting your home at risk. Responsible borrowing is key.

2. Home Values Can Fluctuate

If the real estate market dips, your equity could shrink. That’s why it’s important not to borrow the full 80% if you don’t need to.

3. There Are Costs Involved

Accessing equity typically involves fees—like appraisals, legal fees, or discharge penalties if you’re breaking your mortgage. A good broker will walk you through those upfront and help you decide if it’s worth it.

Using Home Equity for Debt Consolidation

Let’s say you owe:

$20,000 on credit cards (at 21% interest)

$15,000 on a personal loan (at 12%)

Monthly payments: over $1,200

If you own a home worth $700,000 with a $450,000 mortgage, you could potentially refinance and roll that $35,000 into your mortgage at 8% interest. Now, your monthly payment on that portion drops to around $270—and you’ve eliminated thousands in interest payments over time.

That’s the power of home equity when it’s used wisely.

How Do You Calculate Your Home Equity?

Before you can borrow against your equity, you need to know how much of it you actually have. There are two main ways to calculate it:

1. Do It Yourself (Estimate)

You can estimate your home equity using a basic formula:

Home’s Market Value – Mortgage Balance = Home Equity

Example:

Market Value: $850,000

Outstanding Mortgage: $400,000

Home Equity: $450,000

You can use online home value estimators to get a ballpark figure, but keep in mind—they're just estimates.

2. Get a Professional Appraisal

For an accurate, lender-accepted valuation, you’ll need a formal appraisal. This is usually required if you’re applying for a home equity loan, second mortgage, or refinance.

At 360Lending, we can coordinate this step for you and help make sure you’re getting the most from your property’s current market value.

HELOC vs. Refinancing vs. Second Mortgage

If you’re considering using your home equity, it’s important to choose the right type of product. Here’s how the three options differ:

Home Equity Line of Credit (HELOC)

Revolving credit line—you borrow as needed, repay, and borrow again.

Interest-only payments available, giving you flexibility.

Rates are usually variable and lower than credit cards.

You only pay interest on what you borrow.

Best for:

Ongoing expenses (e.g. renovations, education)

People with strong credit and stable income

Borrowers who prefer flexibility over structure

Mortgage Refinance

Replace your current mortgage with a new one at a higher amount.

Access up to 80% of your home’s value.

Can roll in other debts for consolidation at lower rates.

Offers fixed or variable rate options.

Best for:

Homeowners renewing their mortgage

Those looking to lock in a structured repayment plan

People consolidating large amounts of debt

Second Mortgage / Home Equity Loan

A separate loan secured against your home, in second position behind your primary mortgage.

Fixed terms and often higher interest than a refinance, but faster to set up.

No need to break your current mortgage.

Best for:

Quick access to cash

People with lower credit scores or unconventional income

Borrowers with a great rate on their first mortgage they don’t want to lose

Can You Increase Your Home Equity Faster?

Absolutely—and for many Ontario homeowners, doing so is a smart move, especially if you plan to borrow against your home in the future or sell at a profit.

Here’s How:

Make extra payments toward your mortgage principal

Even an extra $100 per month can shave years off your mortgage and add thousands to your equity.

Switch to accelerated payments

Bi-weekly payments result in 26 payments a year instead of 12—effectively giving you one full extra payment annually.

Invest in value-boosting renovations

Kitchen and bathroom upgrades, finishing a basement, or adding curb appeal can significantly raise your home’s market value.

Avoid borrowing up to the maximum

Leaving some cushion (e.g. staying under 75% LTV instead of maxing at 80%) helps protect your equity if property values drop.

Home Equity Is a Tool—Use It Wisely

At the end of the day, home equity isn’t “free money.” But it is a flexible, powerful tool that homeowners can use to unlock financial stability, reduce debt, and build wealth—especially when guided by experts who understand how to make it work for your goals.

Whether you want to consolidate debt, fund a renovation, or just learn what your options are, the team at 360Lending is here to help.

We’ll calculate how much equity you can access, compare loan options, and help you make the move that gives you the most value—without putting your home or credit at risk.

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