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Home Equity Loan

Explore how home equity loans work in Canada, when to use them, and how to borrow responsibly against your property’s value.

Home Equity Loan

National Bank

May 22, 2025


What is a Home Equity Loan?

A home equity loan is a type of loan where homeowners borrow against the equity they've built in their property, using the home as collateral.

Why Home Equity Loans Matter in Real Estate

In Canadian real estate, home equity loans are useful tools for accessing large sums of money at relatively low interest rates. Equity is calculated as the current market value of the property minus any outstanding mortgage balance.

These loans are typically used for:
  • Home renovations
  • Debt consolidation
  • Education expenses
  • Large purchases

Home equity loans usually come with fixed interest rates and repayment terms, making them predictable and easier to budget than lines of credit. However, because the home is used as collateral, failure to repay the loan could result in foreclosure or power of sale.

Lenders generally allow borrowing up to 80% of the home’s appraised value, including the mortgage. Qualification depends on credit score, income, and the amount of existing debt.

Understanding home equity loans helps homeowners leverage their assets responsibly without overextending their finances.

Example of a Home Equity Loan?

A homeowner with $300,000 in equity borrows $50,000 through a home equity loan to renovate their kitchen and bathrooms.

Key Takeaways

  • Borrow against built-up home equity.
  • Fixed interest and repayment terms.
  • Used for major expenses or debt reduction.
  • Home is collateral—risk if unpaid.
  • Must meet lender eligibility criteria.

Related Terms

  • HELOC
  • Equity
  • Mortgage Refinancing
  • Secured Loan
  • Debt Consolidation

Additional Terms

Budgeting

Budgeting in real estate refers to the process of forecasting and managing income and expenses associated with owning, operating, or developing a property.. more

Tenant Improvements

Tenant improvements refer to custom modifications or build-outs made to a leased space to suit the tenant’s operational needs, often negotiated as. more

Highest and Best Use

Highest and best use refers to the reasonably probable use of a property that results in the highest value, provided it is legally permissible,. more

Gross Lease

A gross lease is a commercial lease where the tenant pays a fixed rent, and the landlord covers most or all operating expenses such as property. more

Brownfield

A brownfield is a property that was previously used for industrial or commercial purposes and is now vacant or underused, often requiring. more

Record of Site Condition (RSC)

A Record of Site Condition (RSC) is a formal document filed with a provincial environmental authority certifying that a property meets required. more

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