Borrowing Against Your Home Equity: How the Limits Differ by Product

Start with what equity actually is

The Financial Consumer Agency of Canada (FCAC) defines equity as your home’s appraised value minus what you owe on your mortgage, HELOC and any other loans secured by the home.

Its example is a $250,000 home with a $150,000 mortgage, which leaves $100,000 in equity. That number is a starting point, not what you can borrow. Each product then applies its own ceiling to the home’s value.

It also depends on an appraisal, not on the price you paid or what a neighbour’s home sold for. If values in your area have softened, the room can be smaller than it was a year ago.

The four products and their ceilings

According to FCAC, the maximum amounts are:

• Second mortgage: up to 80% of the appraised value, minus your mortgage balance. Fixed or variable, generally priced above a first mortgage, and paid out as a lump sum.
• HELOC: up to 65% of the appraised value. Variable pricing, and you can borrow, repay and borrow again up to the limit.
• Home equity loan: up to 80% of the home’s value, as one lump sum, with no re-borrowing once it is repaid.
• Reverse mortgage: up to 55% of the appraised value, minus your mortgage balance, available as a lump sum or instalments. FCAC says eligibility usually requires being 55 or older.

FCAC adds that a HELOC combined with a mortgage must be with the same lender as the mortgage, and the credit available grows as you pay the mortgage down. A standalone HELOC is independent of the mortgage. It lists minimum equity of more than 35% for a standalone HELOC and 20% for one combined with a mortgage.

A worked example

Take a home appraised at $800,000 with a $400,000 mortgage balance. These figures are illustrative.

• Second mortgage ceiling: 80% of $800,000 is $640,000, less the $400,000 balance, leaves up to $240,000.
• Reverse mortgage ceiling: 55% of $800,000 is $440,000, less $400,000, leaves up to $40,000.
• HELOC ceiling: 65% of $800,000 is $520,000. How the existing mortgage counts toward that depends on whether the HELOC is combined with the mortgage or standalone, so that one is worked out per file.

The same house gives very different answers, which is why the question to start with is not “how much equity do I have” but “which product fits what I need the money for.”

Costs and risks to weigh

FCAC lists costs that can include appraisal, title search, title insurance and legal fees, and possibly a new mortgage loan insurance premium or changes to the terms of your original mortgage.

On risk, it is direct: your home secures the borrowing, so you could lose it if you cannot repay. For a HELOC specifically, it notes that your lender may change its pricing at any time, must notify you in writing within 30 days, and that paying interest only will not pay the loan off. Easy access to funds, it warns, may encourage borrowing more than you can repay.

Borrowing against the home also reduces the equity left for other uses. That can matter later if you need to renew, move, or help a family member.

Choosing between them

A rough way to think about it, not a rule: a HELOC suits money drawn in stages or that you may not use; a lump-sum product suits a single known amount; a reverse mortgage addresses a different situation entirely and is explored on our reverse mortgages page. Replacing the whole mortgage is a separate route, covered on our refinancing page.

We have also explained why a HELOC balance can sit still, which is worth reading before you rely on one. If you want to see the numbers for your own home, book a call and we will compare the options. Illustrative only and subject to lender approval and final terms.