Home Equity
Valeur nette de la propriété in French
Quick definition
Home equity is your home's current market value minus everything you owe against it: mortgage, HELOC balance, and any other loan secured by the property. It is the portion of the home you truly own, and you can only spend it by borrowing or selling.
What counts, and what doesn't
Equity is a simple subtraction: today's market value minus all debts secured by the home. A $700,000 house carrying a $420,000 mortgage holds $280,000 of equity. Note the word market: what matters is what the home would sell for now, not what you paid for it. Any HELOC balance or second mortgage also comes off the top.
Three ways equity grows
Your equity moves for three reasons, and only one of them is fully under your control.
- Paying down principal. Every regular payment shifts a little more of the home from the lender's column to yours, slowly in the early years and faster late in the amortization.
- Price appreciation. When the market lifts your home's value, your equity captures the entire gain, because your debt does not grow with the price.
- Renovations that add value. A renovation raises equity only by the value it adds, which is usually less than it costs. A $60,000 kitchen that adds $40,000 of resale value adds $40,000 of equity.
How much of it you can borrow
Lenders will not lend you all of it (as of July 2026). Through mortgage refinancing you can borrow up to 80% of the home's value, minus what you still owe. A HELOC can revolve up to 65% of the value, inside the same 80% combined ceiling. And equity alone is not enough: you still qualify on income, credit, and the stress test.
Homeowners aged 55 and over have one more option: a reverse mortgage, which pays out cash with no required payments and collects everything, plus interest, when the home is sold or the owner dies. Rates run well above regular mortgage rates and the interest compounds against your equity the entire time, so it deserves independent advice and an honest comparison with simply downsizing.
Equity is not cash
It is tempting to read $280,000 of equity as money in the bank. It is not. Every way of accessing it while keeping the home, refinance, HELOC, second mortgage, reverse mortgage, is borrowing, with interest and eventual repayment. The only way to turn equity into cash you do not owe back is to sell, typically by downsizing to a cheaper home and keeping the difference.
Negative equity
Equity can fall below zero: owing more than the home is worth. It is rare in Canada but possible when a small down payment meets a price drop; buy with 5% down and a 10% dip puts you underwater on paper. Negative equity only bites if you must sell or borrow against the home. If you can keep making payments, it usually heals as the balance shrinks and prices recover.
In Canada
For most Canadian households, home equity is the largest single component of net worth, which is exactly why regulators cap how much of it can be borrowed. The 80% refinance ceiling and the 65% HELOC cap are federal underwriting rules designed to keep a cushion in the home even after you borrow, so that an ordinary price dip does not push borrowers underwater.
Equity also enjoys a major tax break: when you sell your principal residence, the gain is generally exempt from capital gains tax. Decades of equity growth can be collected tax-free at sale, something no ordinary investment account offers.
Worked example
Nadia's home is worth $700,000 and her mortgage balance is $420,000, so her equity is $280,000. The refinance ceiling is 80% of $700,000, which is $560,000. Subtracting the $420,000 she still owes leaves up to $140,000 she could access by refinancing, provided she qualifies on income and credit.
Notice the gap: she has $280,000 of equity but can borrow at most $140,000 of it. The other $140,000 is the 20% cushion the rules force her to keep in the home.
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated July 2026