In short
It grows two ways: every payment reduces what you owe, and the home's value can rise over time.
You can tap it later for renovations, investments or the down payment on your next home, through a refinance or a home equity line of credit.
How equity grows
Equity is your home's market value minus everything you owe that's secured against it. Your down payment is your starting equity.
It grows in two ways. Each mortgage payment includes some principal, which lowers your balance, and the home's value can rise over time.
Equity can also shrink. If prices fall, or you borrow more against the home, your share goes down.
Early in a mortgage, most of each payment goes to interest, so equity builds slowly at first. Making lump-sum prepayments or choosing a shorter amortization speeds it up, within your mortgage's prepayment limits.
Ways to use it
You can turn equity into cash by selling, refinancing, or opening a home equity line of credit, called a HELOC. Many sellers use equity from their current home as the down payment on the next one, sometimes with bridge financing if the dates don't line up.
Borrowing against your home adds debt and interest, and your home secures that debt. Plan how you'll pay it back before you borrow.
Equity also matters when you sell. After paying off the mortgage, real estate commission, legal fees and any penalty for breaking your mortgage early, what's left is the money you take to your next home.
How much you can borrow
According to the Financial Consumer Agency of Canada, you can usually borrow up to 80% of your home's value through a combination of mortgage and home equity products. The revolving HELOC portion is generally limited to 65% of the home's value.
Lenders still check your income, credit and debts, so having equity doesn't guarantee approval. Most will want an appraisal to confirm the current value.
Some lenders, such as credit unions or private lenders, may set different limits. Compare the rate, fees and repayment terms of each option, because a refinance and a HELOC can work very differently.
Common questions about equity
How do you calculate home equity?
Subtract what you owe on your mortgage and any other secured loans from your home's current market value. A home worth $700,000 with a $400,000 mortgage has $300,000 in equity. An appraisal gives the most reliable value if you plan to borrow.
How much equity can I borrow in Canada?
You can usually borrow up to 80% of your home's value in total, including your existing mortgage. A HELOC on its own is generally limited to 65% of the home's value. Lenders still require you to qualify based on income, credit and debts.
Can I use my home equity for a down payment on another home?
Yes, many buyers use equity from their current home toward the next purchase. Most do it by selling, while some use a HELOC, a refinance or bridge financing if they buy before their sale closes. Each option adds cost, so compare them with your lender.
Does equity count as savings?
Not exactly, because it isn't cash until you sell or borrow against it. Its value depends on the market and can fall as well as rise. Borrowing to access it means paying interest, so treat it as wealth tied up in your home.
Sources
General information for Ontario, updated October 2026. Not legal, tax or mortgage advice. Rules change, so confirm with your lawyer, lender or the source above before you rely on it.