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Home Equity

Learn what home equity is, how to calculate it, and how Canadian homeowners can use it to unlock funds or build financial stability.

Home Equity

May 22, 2025


What is Home Equity?

Home equity is the difference between a property’s market value and the outstanding balance on any mortgage or home loan secured against it.

Why Does Home Equity Matter in Real Estate

In Canadian real estate, home equity represents a homeowner’s financial stake in their property. It increases as the mortgage is paid down or the property appreciates in value.

Equity can be accessed through refinancing, a home equity loan, or a HELOC (Home Equity Line of Credit). These funds can be used for renovations, investments, or debt consolidation.

It also plays a role in loan-to-value (LTV) calculations, which impact mortgage terms, insurance, and interest rates. More equity generally means lower lender risk and better borrowing terms.

Understanding home equity helps homeowners build financial security and tap into property value when needed.

Example of Home Equity in Action

A home valued at $850,000 with a mortgage balance of $500,000 gives the owner $350,000 in home equity.

Key Takeaways

  • The portion of the property the owner truly owns.
  • Increases with appreciation and mortgage payments.
  • Can be used for borrowing or reinvestment.
  • Impacts loan approval and interest rates.
  • Key tool for financial planning.

Related Terms

Additional Terms

Public Realm Improvements

Public realm improvements are enhancements to public spaces such as sidewalks, parks, plazas, and streetscapes, often funded or contributed by. more

Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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