All the different ways to access equity in your home

By: Jessica Vomiero and Arshi Hossain on June 29, 2026

Updated on June 30, 2026 by Arshi Hossain | Written originally by Jessica Vomiero on July 12, 2024.

Buying a home may seem like a one-time purchase, but it’s actually a long-term investment. As you continue to live in your home and if the property appreciates, you build equity.

You can access your home equity through options like a home equity line of credit (HELOC), home equity loan, reverse mortgage, refinancing your mortgage, or taking out a second mortgage.

Your home’s equity is the value of your property minus outstanding mortgage balances. This equity can come in handy when you need to pay for renovations or consolidate debt.

Each of these options has its own advantages and drawbacks. This article explains the different ways you can access your home equity and when you may want to take advantage of each one.

Article at a glance:

What are the main ways to access home equity in Canada?
What is a HELOC and when should homeowners use one?
What is a home equity loan and how does it work?
What is a reverse mortgage and who qualifies in Canada?
Can you access home equity by breaking your mortgage?
How does refinancing help you access home equity?
What are the risks of using home equity?
Home equity FAQs

What are the main ways to access home equity in Canada?

Category	HELOC	Home equity loan	Reverse mortgage	Refinancing
Credit qualifications	Min. 680 at major banks; as low as 600–620 with alternative lenders. Income verification required.	Min. 680 at major banks. Income and employment verification required.	No minimum credit score or income verification. Qualification is age- and equity based only.	Min. 680 for best rates. Full requalification required—treated as a new mortgage application.
Borrowing limit	Up to 65% of home value (OSFI cap). Combined mortgage + HELOC cannot exceed 80%.	Up to 80% of appraised value, minus your outstanding mortgage balance.	Up to 55% of home value; some lenders extend to 59% for older borrowers.	Up to 80% of appraised value, minus your outstanding mortgage balance.
Payments	Interest-only on the amount drawn. No fixed repayment schedule—revolving.	Fixed principal + interest on the full lump sum from day one.	No required monthly payments. Interest compounds onto the balance. Repaid in full when you sell, move out, or pass away.	Regular principal + interest payments restart on the full new mortgage amount.
Interest rates	Variable Tied to prime rate. Higher than a standard mortgage, lower than unsecured credit.	Fixed or variable Higher than a first mortgage; lower than a reverse mortgage.	Fixed or variable Highest of all four options—typically 2–2.5% above standard mortgage rates. Only two lenders in Canada limits competition.	Fixed or variable Typically, the lowest of these options.
Potential risks	Lender can freeze or reduce your limit if home values fall or your credit drops. You must qualify on the full limit—even if unused.	Interest accrues on the full lump sum immediately, whether you've used it all or not. Less flexible if your costs change.	Compounding interest erodes equity over time and reduces what you leave heirs. Loan may be called if the home stops being your primary residence.	Breaking your current term early triggers prepayment penalties—potentially thousands of dollars. Not ideal if you plan to move soon.
Stress test and OSFI rules	Must pass stress test: qualify at contract rate + 2%, or 5.25%, whichever is higher. HELOC alone capped at 65% LTV since 2023.	Must pass the full mortgage stress test. GDS/TDS ratios assessed on entire loan amount.	Exempt Not subject to the standard B-20 stress test—making it accessible to seniors on fixed incomes who may not qualify elsewhere.	Most stringent of all four. Full stress test applies as a new application, even if you're staying with the same lender.

Source: Financial Consumer Agency of Canada (FCAC), Office of the Superintendent of Financial Institutions (OSFI) Guideline B-20, Bank of Canada.

A second mortgage refers to any mortgage taken out after you’ve borrowed to buy your home. This includes homeowners who take out a HELOC to use the equity in their home, or homeowners who choose to purchase an additional property with an additional mortgage.

Should you default on debt payments, the loan on your first mortgage will need to be paid off prior to the second. Not every second mortgage gives homeowners the option to utilize equity in their homes.

The benefit of taking on a second mortgage is that you won’t have to pay fees associated with breaking your mortgage. However, you’ll now be accountable for two separate loans.

Here are the second mortgage options that let homeowners access their home equity:

What is a home equity line of credit (HELOC), and when should homeowners use it?

A HELOC refers to a line of credit secured against the equity of the home. Homeowners only need to repay the equity they withdraw, which is very similar to a typical line of credit. This option benefits homeowners who are looking to quickly access money, as well as those who don’t know exactly how much money they’ll need–say, for renovations that might gradually increase in cost.

Because the HELOC is a form of revolving credit, homeowners who take out HELOCs will only have to make interest payments on what they borrow, as opposed to fixed payments on the full loan amount.

However, interest rates for HELOCs are usually higher than mortgage rates. If you’re considering a HELOC, it’s important to weigh the risks as well as benefits.

Borrowers should keep in mind that banks can raise the interest rate of a HELOC at any time or ask you to repay the entire amount at any point, even if you haven’t used the whole amount.

Furthermore, homeowners need to prove that they can afford to pay back the entire value of the line of credit when they take out a HELOC, not just what they’ve borrowed.

What is a home equity loan and how does it work?

A home equity loan has some similarities to a HELOC, though it bears more resemblance to a personal loan secured against equity of your home. A homeowner who takes out a home equity loan borrows a lump sum against their home equity and must make regular payments, which includes a fixed interest rate.

Homeowners who are sure of the amount they’ll need may want to consider this option since they can calculate the cost of borrowing when taking out the loan.

Learn more: Your mortgage is up for renewal, but you’ve just lost your job. What now?

What is a reverse mortgage and who qualifies in Canada?

A reverse mortgage is an option specifically designed for elderly Canadians who have paid off at least 50% of their mortgage. A reverse mortgage allows senior homeowners to borrow up to 55% of the value of their homes.

No income verification is required, and you won’t have to make regular payments.

The maximum amount you can borrow is contingent on several factors, including:

Age: Both your age and the age of other individuals listed on the home’s title.
Home details: Includes your home’s condition, type, and appraised value.
Lender: Specific lender you choose.

Seniors might be interested in this option because they won’t be obligated to make a monthly payment until they sell their home or pass away, and they’ll also maintain ownership of their home.

Homeowners interested in reverse mortgages should keep in mind that this option can reduce the amount of equity they have to leave their family should they pass away.

Can you access home equity by breaking your mortgage?

Taking out a second mortgage isn’t the only option for homeowners looking to take advantage of their equity. Replacing your current mortgage with a new one, also known as breaking or refinancing your mortgage, is another way to access your home’s equity.

Just like a second mortgage, this option comes with benefits and drawbacks.

How does refinancing help you access home equity?

Refinancing your mortgage refers to breaking your current mortgage and beginning a new one at a different interest rate. You can access up to 80% of your home’s equity by increasing the value of your mortgage through refinancing.

Compared to taking out a second mortgage, refinancing usually comes with lower interest rates. However, this isn’t the right option for homeowners who plan to leave their home soon.

Another benefit of refinancing is that some lenders might be willing to cover the costs, such as appraisal and legal fees, which can stretch into the thousands of dollars.

The downside to breaking a mortgage before the end of its term is triggering penalties depending on the type of loan. The penalty for a variable rate mortgage is typically three months' interest. For fixed-rate mortgages, the fine is the greater of three months' interest or the interest rate differential (IRD) between your original rate and the lenders current rate for the remaining term.

What are the risks of using home equity?

While your property can be a useful tool when looking for additional funds, it’s important to think carefully about any decision to access your home equity.

Generally, people typically tap into their equity for two reasons:

To increase the value of the home: Homeowners may access their home equity to fund renovations or upgrades—such as installing a swimming pool or adding an extension—that can boost the property’s overall value.
To leave an inheritance: Some individuals use their home equity as part of their financial planning, aiming to preserve or structure assets they can pass on to beneficiaries.

The main risk for homeowners is that they take too much equity from their homes and either leave very little to their heirs, or, in the worst-case scenario, they fail to repay borrowed funds and are forced to foreclose.

So, while your home can be a great way to access funding and consolidate debt, make sure you don’t overdo it. Speak with your lender, or financial advisor about whether any of these options are right for you.

Home equity FAQs

1. Which home equity option is best for Canadians who need flexible, ongoing access to funds?

A HELOC is generally the best fit. It works like a revolving line of credit—you borrow only what you need, pay interest only on what you draw, and can reuse the funds as you repay them. It's well-suited to ongoing costs like phased renovations. The trade-off is that you must qualify based on income and credit, and rates are variable.

2. Can I access home equity in Canada without making monthly payments?

Yes—through a reverse mortgage. Available to homeowners 55 and older, it lets you borrow up to 55% of your home's value with no required monthly payments. Interest compounds onto the loan balance and is repaid in full when you sell, move out, or pass away. It's the only option discussed here that is exempt from a mortgage stress test.

3. What is the mortgage stress test, and does it apply to all home equity products?

The mortgage stress test, governed by OSFI's Guideline B-20, requires borrowers to prove they can afford payments at their contract rate plus 2%, or 5.25%, whichever is higher. It applies to HELOCs, home equity loans, and refinancing. Reverse mortgages are exempt—qualification is based on age and home equity, not income.