What home equity is
Home equity is the difference between your property's current market value and the total mortgages secured against it. If your Toronto home is worth 1.2 million and your mortgage balance is 600,000, you have 600,000 in equity. Lenders express this as loan-to-value, or LTV, which is the total debt divided by the property value. Most equity loans keep the combined LTV at or below 80 percent.
Three ways to access equity
The main options are a refinance, which replaces your existing mortgage with a larger one; a home equity line of credit, which is a revolving credit line secured by the property; and a second mortgage, which sits behind your existing first mortgage. Each has different costs, speed, and qualification requirements.
- Refinance: lowest rate, but breaks your existing mortgage term
- HELOC: flexible revolving credit, requires strong credit and income
- Second mortgage: faster, available through private lenders with bruised credit
- Reverse mortgage: for homeowners 55 and older, no payments required
When a private equity loan is the right choice
Banks require strong credit and documented income to approve a refinance or HELOC. When those criteria are not met, a private equity loan, secured as a second mortgage, can access the same equity with a faster approval and more flexible underwriting. Private lenders focus on the property value and the equity cushion, not the credit score. See our private mortgages page for the full lending framework.
What the money can be used for
Home equity loans are commonly used for debt consolidation, where high-interest debts are rolled into one lower payment, home renovations that add value, funding a business, helping family with a down payment, or covering a major life expense. Private equity loans are particularly effective for time-sensitive needs like stopping a power of sale or closing on a property purchase.
- Consolidating credit cards and lines of credit into one payment
- Renovating to increase property value before a sale
- Funding a business or investment opportunity
- Stopping a power of sale or tax arrears
- Covering a short-term cash gap between transactions
Costs to expect
Bank refinances and HELOCs have lower rates but may include appraisal, legal, and discharge fees for breaking an existing term. Private equity loans carry higher rates and lender fees of 1 to 3 percent, but they close faster and do not disturb your first mortgage. The right choice depends on how quickly you need the money, what you qualify for, and how long you intend to use it.
Planning the exit
Every equity loan should have a plan for how it ends. A bank HELOC can stay open indefinitely as long as payments are made. A private second mortgage is a one-year bridge that should be refinanced or paid out within 12 to 24 months. Knowing the exit before you enter is what separates a useful tool from a costly trap.
Frequently asked questions
- How much can I borrow against my home equity in Toronto?
- Most lenders cap the combined mortgage-to-value at 80 percent, though private lenders may go to 85 percent on strong properties. That means up to 80 percent of your home value, minus your existing mortgage balance.
- Do I need good credit for a home equity loan?
- For a bank refinance or HELOC, yes. For a private equity loan or second mortgage, credit is less important than the equity in your property.
- Are home equity loan payments tax-deductible?
- If the borrowed funds are used for investment purposes, the interest may be deductible. If used for personal expenses, it is not. Consult an accountant for your specific situation.
- How fast can I access my home equity?
- A bank refinance takes 3 to 4 weeks. A private equity loan can close in 5 to 10 business days once the appraisal is complete.
Talk to a Toronto private mortgage specialist
We arrange equity-based financing across Toronto and the GTA, whether you need a first position from a private lender or a second mortgage behind the bank you already have.