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Home equity is the portion of a property's market value that belongs to the owner outright — the difference between the property's current value and the total balance owed against it.
Equity builds two ways: the property's market value rising over time, and the borrower paying down the mortgage principal with each payment. It's the foundation behind a loan-to-value calculation, since LTV is really just measuring how much of the property's value is still owed against versus how much equity the owner holds.
Not all of a homeowner's equity is available to borrow against. Under OSFI's guidelines, a standard refinance is generally capped at 80% loan-to-value, while the HELOC portion of a readvanceable mortgage is capped lower, at 65% LTV. Products like an equity take-out refinance or a reverse mortgage exist specifically to let homeowners access built-up equity without selling.
Refinance capped at 80% LTV: OSFI's guidelines generally limit a standard mortgage refinance to 80% loan-to-value, meaning at least 20% of a property's value must remain as equity.
HELOC portion capped lower, at 65% LTV: the revolving HELOC component of a readvanceable mortgage is limited to 65% loan-to-value, even though the combined mortgage-plus-HELOC can go up to 80%.
Equity underpins LTV: equity and loan-to-value are two ways of describing the same relationship between a property's value and what's owed against it.
Multiple ways to access it: an equity take-out refinance, a HELOC, or a reverse mortgage all let a homeowner convert built-up equity into cash without selling the property.
A homeowner checks their current position:
$700,000 − $420,000 = $280,000. Not all of this is necessarily borrowable, since refinance and HELOC limits cap how much can be accessed.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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