Take equity out of your home
Borrow against the value you have built up, without selling. Here is how much you can access, what it costs and which structure fits.
Start your equity takeout application →How do you take equity out of your home in Canada?
You take equity out by refinancing for more than you owe and receiving the difference as cash, by opening a home equity line of credit, or by adding a second mortgage behind your existing one. The total borrowing is capped at 80% of your home's value, and you have to requalify.
The right route depends on how much you need, when you need it, and what it would cost to break your current mortgage.
- Your total mortgage can be up to 80% of your home's appraised value.
- A standalone HELOC is capped at 65% of value; combined with a mortgage, 80%.
- You requalify at the greater of your contract rate + 2% or 5.25%.
How much equity can you access?
Equity grows two ways: you pay the mortgage down, and the home goes up in value. Lenders let you borrow against it up to 80% of the appraised value, minus what you still owe. The simplest route is to refinance your mortgage for a larger amount.
Example (illustrative)
Home value
$800,000
Current mortgage
$400,000
Available equity (80% LTV)
$240,000
$800,000 × 80% = $640,000 maximum total mortgage. Minus the $400,000 balance leaves up to $240,000, before closing costs and any penalty. Borrowing $100,000 of it at an example 5% over 25 years adds about $582 a month.
Being allowed to borrow $240,000 doesn't mean you should. The stress test will check the payment on the full new balance at the greater of your rate plus 2% or 5.25%, and that is often the real limit. Try different amounts in the mortgage payment calculator before you settle on a figure.
Refinance vs. HELOC vs. second mortgage
Cash-out refinance
Replaces your mortgage with a larger one at a fixed or variable rate. Best for a known lump sum.
Penalty risk: Yes, if mid-term
Rate: Standard mortgage rates
HELOC
A revolving line beside your mortgage, up to 65% of value on its own. Best for staged or uncertain needs.
Penalty risk: Usually none
Rate: Variable, prime-based
Second mortgage
A separate loan behind your first, usually from an alternative or private lender. A short-term bridge.
Penalty risk: None on your first mortgage
Rate: Higher than bank rates, plus fees
If you are near renewal, a refinance at maturity is usually cleanest. If you are mid-term with a big IRD penalty, a line of credit or second mortgage beside your existing loan can cost less overall. Our page on a revolving line secured on your home explains the HELOC limits in detail.
Timing matters: at renewal vs. mid-term
Take the same $800,000 home with $400,000 owing on a 5-year fixed, and a homeowner who wants $60,000 for a new roof and windows. At renewal, refinancing to $460,000 costs only the appraisal and legal fees. Two years before renewal, the same refinance could carry an IRD penalty in the thousands. In that case, a $60,000 line of credit beside the current mortgage, paid down on a fixed schedule, often works out cheaper until renewal, when it can be rolled into the new mortgage.
What lenders look at
Income that covers the new payment at the stress-test rate, your total debt load, your credit history and the appraised value. Self-employed borrowers and those with recent credit issues may still have options through alternative lenders, typically at higher cost and often for a shorter term. Use the time to rebuild, then move back to a bank-rate mortgage at renewal.
Costs
Expect an appraisal ($300–$500), legal fees ($800–$1,500) and a discharge fee if you switch lenders. Breaking a term early adds a penalty: the greater of three months' interest or the IRD on fixed, usually three months' interest on variable. Second mortgages add lender and broker fees, so read the full cost, not just the rate.
How the process works
- Estimate your value and balance. Take 80% of your home's likely appraised value and subtract what you owe.
- Check your penalty. Ask your lender for a payout statement so you know the cost of breaking your term, if any.
- Pick the structure. Choose a refinance, a HELOC or a second mortgage based on timing, penalty and how you'll use the money.
- Apply and qualify. Provide income and debt documents and pass the stress test on the new total borrowing.
- Appraisal and closing. The lender confirms the value, a lawyer registers the new mortgage and the funds are released, usually in two to four weeks.
Common reasons to take equity out
Paying off high-interest debt
Cards at 20% and a car loan at 9% become one payment at a mortgage rate. It only works if the cards stay paid off. See paying off high-interest debt with home equity for the full picture.
Renovations and basement suites
A lump sum works for a fixed-price kitchen. For a suite built in stages, compare a line of credit and our renovation financing options.
A rental property down payment
Lenders have rules on using borrowed money for a down payment, and the new rental has to qualify on its own numbers too. Interest on money borrowed to earn rental income may be tax-deductible; confirm with your accountant.
Helping family
Parents often take equity to gift a child's first down payment. The gift has to be documented, and your own mortgage still has to qualify with the higher balance.
Frequently asked questions
Short answers to the questions homeowners ask before borrowing against their home.
What is a home equity takeout?
A home equity takeout means borrowing against the value of your home and receiving cash, usually by refinancing for more than you owe. Your total mortgage can be up to 80% of the appraised value. People use it for renovations, paying off debt, a rental down payment or helping family.
How much equity can I take out of my home?
Take 80% of your home's appraised value and subtract your current mortgage balance. On an $800,000 home with $400,000 owing, that is up to $240,000 before penalties and closing costs. You also have to qualify for the new payment under the stress test.
Is an equity takeout better than a HELOC?
An equity takeout suits a known, one-time amount that you want to pay down on a schedule. A HELOC suits ongoing or uncertain needs, because you only pay interest on what you draw. A HELOC is capped at 65% of value on its own, while a refinance can go to 80%.
Do I pay a penalty to take equity out?
Only if you break your current mortgage before the term ends. Fixed-rate penalties are the greater of three months' interest or the IRD; variable is usually three months' interest. Taking equity at renewal, or through a HELOC or second mortgage beside your existing loan, avoids that penalty.
Is a second mortgage the same as an equity takeout?
It is one way to do it. A second mortgage is a separate loan registered behind your first mortgage rather than replacing it. Rates and fees are higher, so it is usually a short-term option when breaking the first mortgage would be costly or you don't currently qualify with a bank.
See how much equity you can use
Free to apply and no obligation. An agent will work out your available equity and find the best rate from 65+ lenders.
Start your equity takeout applicationBest available rate from 8Twelve's lender panel, subject to qualification and lender approval. OAC. Your rate depends on your individual financial situation.
Related services and tools
Related services
- Our mortgage refinance guide: Replace your mortgage mid-term to change the rate, the amortization or the amount you owe.
- HELOC options: A revolving credit line secured on your home that you draw on and repay as needed.
- Debt consolidation mortgages: Pay out credit cards and loans with home equity so one payment replaces several.
- Paying for a renovation with home equity: Fund a kitchen, basement suite or addition with equity rather than a high-rate loan.
- Our renewal guide: Compare your lender's renewal offer against the market before you sign it.