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.
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
- Refinance
- HELOC
- Loan-to-Value Ratio (LTV)
- Mortgage
- Real Estate Investing
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95 Clegg Road (centre) in Markham, Ontario. (Colliers)
Small-scale infill share of housing starts in Toronto, Vancouver, and Edmonton/CMHC
Housing starts for one to eight unit developments/CMHC
An overview of Hedge Road Landing. (Alliance Homes)
6525 Mississauga Road and its surrounding context. (RBC Capital Markets & CBRE)
Property details for 6525 Mississauga Road. (RBC Capital Markets & CBRE)
National average resale-price growth and housing-starts growth, smoothed over three months. The comparison illustrates the cycle; it does not establish how much a price change causes construction to change.
Trailing 12-month starts in centres of 50,000 or more remove the usual monthly seasonality. Ownership combines the homeowner and condominium categories; rental is shown separately.
Six-month averages of provincial starts, expressed at annual rates. The smoothing reduces the influence of individual apartment projects.
The same August benchmark compared with two different starting points. Three-month changes are not annualized.
Average sale prices show the difference in purchase costs across markets. They do not measure affordability relative to local incomes or construction costs.
Newfoundland and Labrador remains above its pre-pandemic sales pattern, but August activity was below last year. Historical lines retain their original release vintages.