Access Your Home Equity
Tara Gentles • March 30, 2021
If you've been a homeowner for many years, chances are, your property value has increased significantly. One advantage of homeownership is the opportunity to build equity. Home equity growth, partnered with the security of living in your own home, is why most Canadians believe homeownership is the best choice for them!
For most Canadians, their home equity is their greatest asset, but accessing home equity is often overlooked when putting together a comprehensive financial plan. And although COVID-19 has caused some grief in the economy of late, house prices have remained stable or increased in value through 2020.
Simply put, home equity is the actual market value of your property minus what you owe. For instance, if your home has a market value of $650k and you owe $150k, you have $500k in home equity.
Now, if you aren't interested in selling your home but you'd like to be able to access the equity you have built up over the years, for whatever reason, you've come to the right place. Here are four options for you to consider.
Conventional Mortgage Refinance
Assuming you qualify for the mortgage, most lenders will allow you to borrow up to 80% of your property’s value through a conventional refinance.
So let’s say your property is worth $500k and you owe $300k on your existing mortgage; if you were to refinance up to 80%, you would qualify to borrow $400k, so after paying out your first mortgage of $300k, you’d end up with $100k (minus any fees to break your mortgage) to spend however you like. Even if you paid off your mortgage years ago and you own your property with a clear title (no mortgage), you can secure a new mortgage to your property.
With the impact of COVID-19 on our economy, interest rates are historically low right now. It never hurts to take a look at your options.
Reverse Mortgage
A reverse mortgage allows Canadian homeowners 55 or older to turn the equity in their home into tax-free cash. There is no income or credit verification, you maintain ownership of your home, and you aren't required to make any mortgage payments. The full amount of the mortgage will become due when you decide to move or sell.
Unlike a conventional mortgage refinance, reverse mortgages won’t allow you to borrow up to 80% of your home equity. Rather, a lesser amount of equity can be accessed depending on your age.
The interest rates here can be slightly higher than the best rates currently being offered through standard mortgage financing. However, the interest rates on reverse mortgages aren’t outrageous; rather, they reflect the relaxed qualification guidelines.
Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit allows you to set up access to the equity you have in your home, but you only pay interest if you use it. Qualifying for a HELOC can be challenging as lender criteria can be pretty strict. Unlike a conventional mortgage, a HELOC doesn't usually have an amortization, so you're only required to make the interest payments on the amount you've borrowed.
Second Position Mortgage
If the cost to break your mortgage is really high, but you need access to cash before your existing mortgage renews, consider a second mortgage.
A second mortgage typically has a set amount of time you have to repay the loan (term) as well as a fixed interest rate (usually higher than conventional financing). After you have received the loan proceeds, you can spend the money any way you like, but you will need to make regular payments on the second mortgage until it's paid off.
If you’re looking for a way to access the equity in your home to free up some cash to spend however you like, please contact me anytime. You’ve got options and I would love to work through all those options with you.
Tara Gentles
CANADIAN MORTGAGE EXPERT
RECENT POSTS
Why the Cheapest Mortgage Isn’t Always the Smartest Move Some things are fine to buy on the cheap. Generic cereal? Sure. Basic airline seat? No problem. A car with roll-down windows? If it gets you where you're going, great. But when it comes to choosing a mortgage? That’s not the time to cut corners. A “no-frills” mortgage might sound appealing with its rock-bottom interest rate, but what’s stripped away to get you that rate can end up costing you far more in the long run. These mortgages often come with severe limitations—restrictions that could hit your wallet hard if life throws you a curveball. Let’s break it down. A typical no-frills mortgage might offer a slightly lower interest rate—maybe 0.10% to 0.20% less. That could save you a few hundred dollars over a few years. But that small upfront saving comes at the cost of flexibility: Breaking your mortgage early? Expect a massive penalty. Want to make extra payments? Often not allowed—or severely restricted. Need to move and take your mortgage with you? Not likely. Thinking about refinancing? Good luck doing that without a financial hit. Most people don’t plan on breaking their mortgage early—but roughly two-thirds of Canadians do, often due to job changes, separations, relocations, or expanding families. That’s why flexibility matters. So why do lenders even offer no-frills mortgages? Because they know the stats. And they know many borrowers chase the lowest rate without asking what’s behind it. Some banks count on that. Their job is to maximize profits. Ours? To help you make an informed, strategic choice. As independent mortgage professionals, we work for you—not a single lender. That means we can compare multiple products from various financial institutions to find the one that actually suits your goals and protects your long-term financial health. Bottom line: Don’t let a shiny low rate distract you from what really matters. A mortgage should fit your life—not the other way around. Have questions? Want to look at your options? I’d be happy to help. Let’s chat.
What Is a Second Mortgage, Really? (It’s Not What Most People Think) If you’ve heard the term “second mortgage” and assumed it refers to the next mortgage you take out after your first one ends, you’re not alone. It’s a common misconception—but the reality is a bit different. A second mortgage isn’t about the order of mortgages over time. It’s actually about the number of loans secured against a single property —at the same time. So, What Exactly Is a Second Mortgage? When you first buy a home, your mortgage is registered on the property in first position . This simply means your lender has the primary legal claim to your property if you ever sell it or default. A second mortgage is another loan that’s added on top of your existing mortgage. It’s registered in second position , meaning the lender only gets paid out after the first mortgage is settled. If you sell your home, any proceeds go toward paying off the first mortgage first, then the second one, and any remaining equity is yours. It’s important to note: You still keep your original mortgage and keep making payments on it —the second mortgage is an entirely separate agreement layered on top. Why Would Anyone Take Out a Second Mortgage? There are a few good reasons homeowners choose this route: You want to tap into your home equity without refinancing your existing mortgage. Your current mortgage has great terms (like a low interest rate), and breaking it would trigger hefty penalties. You need access to funds quickly , and a second mortgage is faster and more flexible than refinancing. One common use? Debt consolidation . If you’re juggling high-interest credit card or personal loan debt, a second mortgage can help reduce your overall interest costs and improve monthly cash flow. Is a Second Mortgage Right for You? A second mortgage can be a smart solution in the right situation—but it’s not always the best move. It depends on your current mortgage terms, your equity, and your financial goals. If you’re curious about how a second mortgage could work for your situation—or if you’re considering your options to improve cash flow or access equity—let’s talk. I’d be happy to walk you through it and help you explore the right path forward. Reach out anytime—we’ll figure it out together.
