How much equity can I take out of my home in Canada?

Usually up to 80% of your home's appraised value, minus what you owe on your mortgage and other secured debts. On an $800,000 home with $400,000 owing, that's up to $240,000 before costs. A HELOC's revolving portion is capped at 65% of value, and a reverse mortgage at about 55%.

What is the cheapest way to take equity out of my home?

It depends on timing. At renewal there's no prepayment penalty, so a refinance is often cheapest because mortgage rates are usually lower than HELOC or second-mortgage rates. Mid-term, a HELOC or second mortgage can cost less because you don't break your existing mortgage.

Do I need to pass the stress test to take equity out?

Yes, at a bank. You must qualify at the higher of 5.25% or your contract rate plus 2% to refinance or get a HELOC. Lenders that aren't federally regulated may also apply a stress test. Reverse mortgages are assessed differently.

Is money from a home equity takeout taxable?

Borrowed money isn't income, so it isn't taxed when you receive it, and reverse mortgage funds don't affect OAS or GIS benefits. Whether the interest is tax-deductible depends on how you use the money, so speak with a tax professional.

Can I take equity out of my home with bad credit?

Sometimes. Alternative and private lenders may approve borrowers that banks decline, usually at higher rates and fees, and often as a shorter-term second mortgage. 8Twelve arranges these through third-party lenders and discloses all fees in writing before you commit.

Can I take equity out of a rental property?

Often yes, through a refinance, HELOC or second mortgage on the rental, but lenders may set lower limits, count rental income differently and charge higher rates than for a home you live in. Reverse mortgages usually require the home to be your principal residence.

How long does a home equity takeout take?

In our experience, a straightforward refinance or HELOC often takes two to four weeks from application to funding, depending on the appraisal, documents and the lawyer's schedule. Private second mortgages can sometimes close faster.

Home Equity Takeout in Canada: How Much and How

Short answer: A home equity takeout in Canada lets you borrow against the part of your home you own. Most homeowners can borrow up to 80% of their home's appraised value, minus what they owe on their mortgage and other secured debts ^[1]. You can access that money through a refinance, a home equity line of credit (HELOC), a home equity loan or second mortgage, or, if you're 55 or older, a reverse mortgage ^[1]^[3].

This guide is for Canadian homeowners who want to know how much they can access, which route fits their situation and what it will really cost. It's the starting point for our equity series. For the refinance route in depth, see our complete mortgage refinance guide, and for options we arrange, see our home equity takeout page.

What is a home equity takeout?

Home equity is your home's value minus everything you owe that's secured by it, including your mortgage, any HELOC and other secured loans ^[1]. A home equity takeout (lenders also call it "equity release") turns some of that equity into cash, either as a lump sum, a credit line or regular advances ^[1]^[3]. Your home secures the money you borrow, which is why rates are usually lower than unsecured credit, and also why falling behind can put your home at risk ^[1].

Your equity grows as you pay down your mortgage and when your home's value rises ^[1]. Lenders base the numbers on an appraisal, not on an online estimate or your property tax assessment.

How much equity can you take out in Canada?

The limit depends on the product. These are the standard ceilings, measured against your home's appraised value:

Product	Typical maximum	Source
Refinance (new, larger first mortgage)	80% of value, minus what you owe	Bank Act and FCAC ^[1]^[6]
Home equity loan or second mortgage	80% of value, minus what you owe	FCAC ^[1]
HELOC	Revolving portion up to 65% of value; combined with a mortgage, up to 80% in total	FCAC and OSFI ^[2]^[7]
Reverse mortgage (usually 55+)	Up to 55% of value, minus what you owe	FCAC ^[1]^[3]
Re-borrowing prepayments	The amount you've prepaid, if your lender allows it	FCAC ^[1]

Illustration (not an offer): your home appraises at $800,000 and you owe $400,000, so you have $400,000 of equity, or 50%.

Step	Amount
80% of $800,000	$640,000
Minus your mortgage balance	−$400,000
Maximum you could add (refinance, home equity loan or second)	up to $240,000
HELOC revolving cap (65% of $800,000)	$520,000, but your total can't pass $640,000, so in practice up to $240,000
Reverse mortgage (55% of $800,000 = $440,000, minus $400,000)	up to about $40,000 net, and less depending on age and lender

Penalties and closing costs you add to the loan come out of that room, and lenders can set lower limits for some properties or borrowers. A reverse mortgage limit also depends on your age, your home and the lender ^[3].

One exception to the 80% rule: CMHC's insured refinance for building a secondary suite can go up to 90% of the as-improved value for eligible owner-occupied homes, but the money must go to the suite, not to a general equity takeout ^[8].

Six ways to take equity out of your home

Option	How you get the money	Rate type	Payments	Breaks your mortgage?	Often fits
Refinance	Lump sum; new, larger mortgage	Fixed or variable	Principal and interest	Yes, mid-term (penalty applies) ^[5]	Large amounts at renewal; a fixed payoff plan
HELOC	Credit line; borrow, repay, reuse	Usually variable (prime plus a spread) ^[2]	Interest-only or interest plus principal ^[2]	No, if added alongside your mortgage	Staged or uncertain costs, like a renovation
Home equity loan	Lump sum	Fixed or variable, usually above mortgage rates ^[1]	Fixed principal and interest ^[1]	No	A one-time cost you want repaid on a schedule
Second mortgage	Lump sum, registered behind your first	Usually higher than a first mortgage ^[1]	Varies; often interest-only with private lenders	No	Mid-term needs when breaking the first would cost too much
Re-borrow prepayments	Lump sum added to your mortgage ^[1]	Blended or same as your mortgage ^[1]	Part of your mortgage payment	No	Small amounts, low or no fees ^[1]
Reverse mortgage (55+)	Lump sum, or part now and part over time ^[3]	Usually higher than a mortgage or HELOC ^[3]	None required until you sell, move or the last borrower dies ^[3]	Existing mortgage usually has to be paid off ^[3]	Retirement cash flow without monthly payments

Another route some lenders offer is a blend-and-increase: in our experience, your lender blends your current rate on the existing balance with today's rate on the new money, which can avoid the full penalty. Availability and terms vary by lender, so ask before you assume it's an option.

Want to know your real number? A licensed 8Twelve agent can estimate your available equity and compare refinance, HELOC and second-mortgage options across 65+ lenders, at no cost to you, OAC. Explore equity takeout options

Who qualifies for a home equity takeout?

Equity is the first test, but it isn't the only one. Lenders look at:

Equity and appraisal: enough room under the limits above, confirmed by an appraisal. A standalone HELOC usually needs more than 35% equity, and a HELOC combined with a mortgage at least 20% ^[2].
The stress test: banks must qualify you at the higher of 5.25% or your contract rate plus 2% when you refinance or take out a HELOC ^[4].
Debt ratios: housing costs generally shouldn't exceed 39% of gross income (GDS), and all debts 44% (TDS) ^[4].
Credit and income: your credit report, plus proof of income such as pay stubs, an employment letter or Notices of Assessment if you're self-employed ^[4].

A reverse mortgage works differently: there's no income test in the usual sense, but you must usually be 55 or older and the home is usually your principal residence ^[3]. Our guide to reverse mortgage requirements covers that in detail, and our guide to mortgage refinance requirements lists the documents for a refinance.

What does a home equity takeout cost?

Interest is only part of the cost. FCAC lists these common fees for borrowing against equity ^[1]^[2]:

Cost	Applies to	Notes
Prepayment penalty	Refinance mid-term	Usually the higher of 3 months' interest or the interest rate differential (IRD) ^[5]
Appraisal	Most options	Confirms the value the lender will lend against ^[1]
Legal and title fees	Most options	Lawyer (or notary in Quebec), title search and title insurance ^[1]
Discharge or registration fees	Refinance with a new lender, HELOC setup	Some lenders cover part of these
Lender or broker fees	Second and private mortgages	Disclosed in writing before you commit
Mortgage loan insurance premium	Some refinances	FCAC notes you may have to pay a new premium ^[1]

For a closer look at penalties and closing costs, see what it costs to refinance in Canada. If you're considering a private second mortgage in Ontario, our guide to private mortgage refinance fees breaks down typical lender and brokerage fees.

Worked example: $60,000 from the same home, five ways

Same $800,000 home and $400,000 mortgage at 4.29% fixed, with three years left on the term. The goal is $60,000 for a renovation. The rates below are illustrative, not quotes: 4.29% for a refinance, prime (4.45% in the Bank of Canada's latest weekly data ^[9]) plus 0.5% = 4.95% for a HELOC, 8.99% for a second mortgage and 7% for a reverse mortgage. Our guide to HELOC rates in Canada explains how prime plus a spread works.

Option for $60,000	Monthly payment	Interest over 5 years	Owed on the $60,000 after 5 years
Refinance, added to the mortgage over 25 years at 4.29%	about $325	about $12,000	about $52,500
HELOC, interest-only at 4.95%	about $248	about $14,850	$60,000
HELOC, repaid over 10 years at 4.95%	about $635	about $11,800	about $33,700
Second mortgage, interest-only at 8.99%	about $450	about $26,970	$60,000
Reverse mortgage at 7%, no payments	$0	added to the balance	about $84,600 (about $119,400 after 10 years)

Illustrative only. Fixed-rate figures use semi-annual compounding; HELOC figures use monthly interest at a rate held flat for five years; the reverse-mortgage figure compounds semi-annually with no payments. Calculated in Python. Closing costs are not included.

What it shows:

Mid-term, the refinance carries a penalty. Breaking the $400,000 mortgage would cost at least three months' interest, about $4,290 here, and more if the IRD applies ^[5]. That's why a HELOC or second mortgage can cost less when you have years left on your term.
Interest-only feels cheap, but the debt doesn't shrink. FCAC warns that if you only pay the interest on a HELOC, you won't pay off the loan ^[2].
The reverse mortgage has no payment, but the balance grows. At about 7%, the amount owing roughly doubles in 10 years ^[3].
A second mortgage is a bridge, not a destination. Its higher rate makes sense only for a short period, with a plan to pay it out, often at renewal.

What happens to your whole payment? If you refinanced at renewal instead, the $60,000 would be added to the $400,000 balance. Using the same 4.29% rate, a $400,000 balance with 22 years left costs about $2,335 a month; a new $460,000 mortgage over 25 years costs about $2,493, or about $157 more. Your loan-to-value would rise from 50% to 57.5%. Resetting to a longer amortization lowers the payment but adds interest over time, which FCAC flags when you extend your amortization ^[10].

How to choose: a quick guide by situation

Your situation	Often the best place to start	Why
Renewal within a few months	Refinance at renewal	No penalty, and the money gets a mortgage rate ^[5]
Years left on a low fixed rate	HELOC, or a blend-and-increase if your lender offers one	Avoids breaking a good rate and paying a penalty
Costs spread over months (renovation)	HELOC	Interest only on what you draw ^[2]
One lump sum, repaid on a schedule	Home equity loan or refinance	Fixed payments that pay it off ^[1]
Declined by a bank, need a short-term bridge	Second mortgage with an alternative or private lender	Higher cost, so plan the exit before you sign
Age 55+, want no monthly payment	Reverse mortgage, compared with a HELOC and downsizing	No payments, but the balance grows ^[3]

What Canadians use home equity for

Renovations: a HELOC suits staged costs. See our renovation financing options.
Paying off higher-interest debt: replacing credit card or loan debt with mortgage-rate debt can cut monthly costs. Our debt consolidation mortgage guide walks through examples.
Helping family with a down payment: in our experience, lenders usually want a signed gift letter and proof of where the money came from.
Retirement cash flow: a reverse mortgage or a HELOC can supplement income. Reverse mortgage money doesn't affect OAS or GIS benefits ^[3].
Investing or business: possible, but it puts your home behind the investment. Talk to a tax professional and a financial advisor first.

Pros and cons of taking equity out

Pros

Rates are usually lower than unsecured loans and credit cards ^[1]^[2].
Large amounts are available if you have the equity.
Flexible structures: a lump sum, a credit line or payments over time.

Cons

Your home is the security, so missed payments put it at risk ^[1].
It reduces your equity, which can limit future options if you sell ^[2].
Easy access to funds can lead to more debt than planned ^[2].
Fees, and possibly a penalty, add to the true cost ^[1]^[5].

Step by step: taking equity out with a broker

Define the goal and the amount. Borrow what you need, not your full limit ^[2].
Find your maturity date and ask your lender for a written penalty quote ^[5].
Estimate your equity using a realistic value, then confirm it with an appraisal.
Check qualification at the stress-test rate and against the 39% and 44% guides ^[4].
Compare options side by side: refinance, HELOC, second mortgage, blend-and-increase or reverse mortgage, on total cost over the time you'll take to repay.
Set a repayment plan before you sign, especially for interest-only products ^[2].

When a home equity takeout may not be the best fit

You're within a few months of renewal: waiting can avoid the penalty, and you can refinance then.
The need is small: re-borrowing prepayments or a modest HELOC may cost less than a full refinance ^[1].
Your budget is already tight: adding debt, even at a lower rate, can make things harder. If your renewal is the pressure point, our guide for those struggling with a mortgage renewal covers relief options.
You're 55+ and want to stay put without payments: compare a reverse mortgage with downsizing and a HELOC before deciding ^[3].

8Twelve arranges second and private mortgages through third-party lenders; we don't lend or fund private mortgages ourselves.

From our desk: The most common surprise we see is the penalty. People plan a refinance for the equity, then find the cheapest route mid-term is a HELOC or a short second mortgage, refinanced into one loan at renewal. Knowing your maturity date before you shop can save thousands. Our refinance now-or-wait framework helps you weigh the penalty against the saving.

A home equity takeout can be a smart, lower-cost way to fund a renovation, pay off higher-interest debt or support retirement, as long as the product matches your timing and you have a plan to repay it. Start with your maturity date and a realistic value, then compare total costs, not just rates.

Run the numbers: test a new payment with our mortgage payment calculator, or see how paying off debt would change your budget with our debt consolidation calculator.

This article is for general information only and isn't financial, legal or tax advice. Rates, products and terms change without notice and are available on approved credit (OAC). The rate and terms you qualify for depend on your individual financial situation, including credit, income, property and loan-to-value. "Best rates" means the most suitable options available for your situation, not a guarantee of the lowest rate. Example rates and payments are for illustration only, as of October 2026, and are not an offer. 8Twelve Mortgage arranges mortgages through 65+ lenders and does not lend directly. Licensed across Canada — see our licences.

Example rates are for illustration only, as of October 26, 2026, and are not an offer. Your actual rate depends on your situation, OAC. The worked example uses an assumed home value, balance and rates, semi-annual compounding for fixed and reverse-mortgage figures and monthly interest for the HELOC; your lender's figures will differ. 8Twelve does not fund second or private mortgages; we arrange them with third-party lenders. Private mortgages carry higher costs, and lender and brokerage fees are disclosed in writing before you commit. Reverse mortgage interest accrues and reduces your home equity over time; we recommend involving family and obtaining independent legal advice. Rules checked against FCAC, OSFI, CMHC, the Bank Act and the Bank of Canada on October 26, 2026.

Home equity takeout in Canada: how much you can borrow and how

Key takeaways