Home equity is the part of your home’s value that you own outright. This page shows how to calculate it, how it changes over time, and how much of it you could borrow under the federal lending limits. It is part of WealthNorth’s refinancing and home equity guide.
The formula
The Financial Consumer Agency of Canada (FCAC) defines home equity as the difference between your home’s appraised value and what you owe on your mortgage, your HELOC and any other loans and lines of credit secured by the home (FCAC, borrowing against home equity):
Home equity = home value − mortgage balance − HELOC balance − other loans secured by the home
| Input | Where to find it |
|---|---|
| Home value | An appraisal, or recent sales of similar homes; how much is my house worth covers the methods |
| Mortgage balance | Your mortgage statement or online banking |
| HELOC and other secured balances | The statement for each account secured by the home |
Examples
The homes and balances below are illustrations; equity and the loan-to-value ratio (LTV, what you owe as a share of the value) are computed from them. Equity share is equity ÷ home value and LTV is the amount owing ÷ home value, so together they account for the whole value.
| Home value | Owing (all secured debt) | Equity | Equity share | LTV |
|---|---|---|---|---|
| $500,000 | $400,000 | $100,000 | 20% | 80% |
| $600,000 | $350,000 | $250,000 | 41.7% | 58.3% |
| $800,000 | $500,000 | $300,000 | 37.5% | 62.5% |
| $500,000 | $475,000 | $25,000 | 5% | 95% |
How equity changes
According to the FCAC, your equity goes up as you pay down your mortgage, your HELOC or other loans secured by the home, and if the home’s value increases. A fall in value reduces it.
Paying down the mortgage
Each payment covers that month’s interest first, and the rest reduces the balance. The example compounds interest semi-annually. A $450,000 mortgage at an illustrative 4.5% fixed rate, amortized over 25 years, has a monthly payment of $2,490.63. The balances below follow from that payment: balance after n half-years = loan × (1 + 0.045 ÷ 2)n − payment × ((1 + 0.045 ÷ 2)n − 1) ÷ monthly rate. For reference, the Bank of Canada’s average rate on new uninsured fixed-rate mortgages with terms of 5 years and over was 4.49% in July 2026.
| End of year | Mortgage balance | Principal repaid so far | Payments made so far |
|---|---|---|---|
| 1 | $439,972 | $10,028 | $29,888 |
| 5 | $395,084 | $54,916 | $149,438 |
| 10 | $326,482 | $123,518 | $298,876 |
| 15 | $240,785 | $209,215 | $448,313 |
| 25 | $0 | $450,000 | $747,189 |
In the first year, $19,860 of the $29,888 paid goes to interest and $10,028 to principal. Prepayments go straight to principal, so they raise equity faster; paying off your mortgage early and prepayment privileges cover how much extra a lender lets you pay.
Changes in the home’s value
A price change moves equity dollar for dollar, because the mortgage balance doesn’t change with the market. Home prices can fall as well as rise, and no rate of growth is assured. The table applies three illustrative annual rates of change to a $600,000 home.
| After | Falls 2% a year | Rises 2% a year | Rises 4% a year |
|---|---|---|---|
| 5 years | $542,352 | $662,448 | $729,992 |
| 10 years | $490,244 | $731,397 | $888,147 |
Both together
A $600,000 home bought with the $450,000 mortgage above starts with $150,000 of equity. If its value rises 2% a year, after 10 years it is worth $731,397, the mortgage balance is $326,482, and equity is $404,915: the original $150,000, plus $123,518 from paydown and $131,397 from the price change. If the value falls 2% a year instead, equity after 10 years is $163,762.How much of your equity you can borrow
Not all of your equity can be borrowed. At a federally regulated lender, two limits apply: the revolving part of a HELOC can't exceed 65% of the home's value, and everything borrowed against the home (the mortgage plus the HELOC, or a refinanced mortgage) can't exceed 80% of its value. HELOC room is therefore the lower of 80% of the value minus the mortgage and 65% of the value. Mortgage insurance can't take a refinance above 80%, except a refinance to build secondary suites that takes no equity out. FCAC lists the equity you need: more than 35% for a standalone HELOC and at least 20% for a HELOC combined with a mortgage.
The room under the combined limit is that share of the home’s value minus everything already owed against the home. The revolving HELOC part is capped separately, so a HELOC combined with the mortgage gets the lower of the two. A standalone HELOC is tighter: FCAC’s equity minimum keeps it and the mortgage together under 65% of the value. A negative result means no room. The examples apply the limits to illustrative homes.
| Home value | Owing | Room under the combined limit (80% of value, minus owing) | Cap on the revolving HELOC part (65% of value) | HELOC combined with the mortgage (lower of the two) | Standalone HELOC (just under) |
|---|---|---|---|---|---|
| $600,000 | $400,000 | $80,000 | $390,000 | $80,000 | $0 |
| $600,000 | $350,000 | $130,000 | $390,000 | $130,000 | $40,000 |
| $800,000 | $450,000 | $190,000 | $520,000 | $190,000 | $70,000 |
| $500,000 | $450,000 | $0 | $325,000 | $0 | $0 |
| $800,000 | $100,000 | $540,000 | $520,000 | $520,000 | $420,000 |
In the first four homes the combined limit is the lower one; in the last, with little owing, the cap on the revolving part is. Reaching the room under the combined limit takes a refinance, a home equity loan or a combined mortgage and HELOC, and the lender also checks that you can afford the payments: Lenders check that you could afford the payments at the greater of your contract rate plus 2% or 5.25%, a floor set by OSFI for uninsured mortgages and by the federal government's mortgage insurance rules (the Minister of Finance's Eligible Mortgage Loan Regulations) for insured ones. The HELOC calculator estimates your own room, and HELOC vs refinance compares the two routes. Refinancing before the end of a term can also bring a prepayment penalty; how mortgage penalties are calculated explains it.
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them between September 25, 2026 and October 2, 2026. How we check facts.
- Bank of Canada: Mortgage rates, fixed 5 years and over: uninsured residential mortgages, funds advanced (data series)
- Bank of Canada: Mortgage rates, fixed 5 years and over: insured residential mortgages, funds advanced (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Data table
- CMHC: CMHC Refinance for Building Secondary Suites
- CMHC: CMHC Purchase
- Financial Consumer Agency of Canada: Home equity lines of credit
- Justice Laws (Canada): Bank Act
- Justice Laws (Canada): Eligible Mortgage Loan Regulations
- OSFI: Residential mortgage underwriting practices and procedures
- OSFI: OSFI exempts uninsured mortgage straight switches from the prescribed MQR and…
- OSFI: Amendments to the minimum qualifying rate for uninsured mortgages