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.
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
September residential sales, not seasonally adjusted; the annual comparison uses CREA’s revised figures. Chart: 
Annual changes in the unadjusted national MLS® HPI and average sale price. The average is affected by the mix of transactions. Chart: 
Seasonally adjusted residential months of inventory by province. Local property types can differ substantially. Chart: 
Ontario and B.C. are the two provinces with forecast annual average-price declines in 2026. Chart: 
Annual average transaction prices in Canadian dollars. Forecast values are not December price targets. Chart: 
Five-year changes in seasonally adjusted composite MLS® HPI benchmarks, September 2021 to September 2026. Chart: 
