HOME EQUITY

A Home Equity mortgage, also referred to as a "second mortgage" or "Home Equity Line of Credit (HELOC)," is a financial tool that empowers homeowners to borrow against the equity they've built in their homes. Home equity represents the difference between the current market value of the home and the outstanding balance on the mortgage(s) secured by the property.

 

In Canada, guidelines stipulate that when extracting equity from a home, a minimum of 20% equity must be maintained in the property. Thus, the total of any first and second mortgage (or first mortgage and HELOC) combined cannot exceed 80% of the home's value.

 

Home equity loans are favored for their ability to provide homeowners with access to funds for various needs. Moreover, these loans often boast lower interest rates compared to other borrowing options since they are secured by the property.

 

This avenue can offer a practical alternative to accessing equity without undergoing a complete refinance process, which might incur penalties on existing mortgages and potentially impact the applicant's current mortgage rate, particularly if it's considerably lower than prevailing market rates.