Looking for Home Equity Loans in Ontario?

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If you're a homeowner in Canada, your home is one of your biggest financial assets. Over time, as you pay down your mortgage and your property value rises, you build equity. That equity can be used to help cover big expenses or deal with debt, and one way to access it is through a home equity loan.

But is a home equity loan a good idea? That depends on your situation, your goals, and how carefully you manage the loan.

How Do Home Equity Loans Work in Canada?

A home equity loan is a type of loan that lets you borrow money by using your home as security. What makes these loans unique is that they’re a form of equity-based lending. This means lenders focus mostly on your loan-to-value (LTV) ratio — the amount you owe compared to what your home is worth.

Let’s say your home is worth $1,000,000 and your mortgage balance is $350,000. That gives you $650,000 in equity. A lender might allow you to borrow up to 80% of your home’s value — which, in this example, could mean up to $450,000, after subtracting your existing mortgage.

Unlike traditional bank loans that focus heavily on income and credit, home equity loans put the spotlight on your home equity. That said, lenders still look at your income and credit score — they just matter less than they would with a bank mortgage or loan. In other words, equity is the main factor; income and credit are still important, but secondary.

Good Reasons to Get a Home Equity Loan

There are a number of good reasons why Canadians use home equity loans. In many cases, it’s about solving short-term cash flow problems or consolidating higher-interest debt. Here are a few of the most common uses:

1. Debt Consolidation

One of the top reasons people get a home equity loan is to pay off high-interest credit cards or personal loans. Since home equity loans often have lower interest rates than unsecured debt, consolidating can reduce your monthly payments and help you get out of debt faster.

2. Home Renovations

Renovating your kitchen, finishing your basement, or upgrading your windows can improve your lifestyle and increase your property value. Homeowners often use equity loans to fund these upgrades without dipping into savings.

3. Major Life Expenses

Some people use home equity loans to cover major costs like tuition, unexpected medical bills, or helping a family member with a down payment. These are large, one-time expenses that are difficult to manage without borrowing.

4. Business or Investment Opportunities

If you're starting a business or investing in real estate, you may use a home equity loan to access startup funds. This can be a strategic move, but it comes with risks — especially if your new venture doesn’t go as planned.

Bad Reasons to Get a Home Equity Loan

Home equity is basically your savings — tied up in your property. If you wouldn’t spend your hard-earned savings on something, you probably shouldn’t use your home equity either.

1. Vacations or Luxury Purchases

Would you drain your savings to go on a trip or buy the newest gadget or car? If not, don’t use your home equity either. These things lose value quickly and don’t improve your financial position.

2. Speculative Investments

Investing borrowed money into stocks, cryptocurrency, or speculative ventures might seem like a shortcut to wealth — but if it doesn’t work out, you’ll still owe the full amount (plus interest). And your home is on the line if you can’t repay.

3. Purchasing Another Property

Purchasing another property with your equity is okay, but not necessarily with a home equity loan in second position. Ask your broker about refinancing or getting a reverse mortgage instead.

Before you tap into your home equity, ask yourself: “Would I feel comfortable spending my savings on this?”

Which Banks Offer Home Equity Loans in Canada

Most Canadian homeowners don’t realize that major banks do not true home equity loans.

What banks do offer are home equity lines of credit (HELOCs). These are revolving credit lines secured against your home, similar to a large credit card. But to qualify, you need to have good credit, strong income, and meet all the bank’s lending rules.

Even if you have a lot of equity in your home, you won’t get approved by a bank for a HELOC unless you meet their strict income and credit requirements. That’s why HELOCs are not an option for everyone — especially if you’re self-employed, retired, or recovering from a credit issue.

That’s where home equity loans from private lenders come in. These loans are based more on your equity than your income, and they’re offered through licensed mortgage brokers — not banks.

Private home equity lenders focus on your property value and how much you owe on it. They often work with people who are turned down by traditional banks but still have valuable assets. The interest rates are slightly higher, but they offer more flexibility and faster approvals.

How to Apply for a Home Equity Loan in Ontario

If you want to apply for a home equity loan in Ontario, there’s only one safe and legal way to do it: through a licensed mortgage broker. These loans are not available directly through banks.

Licensed mortgage brokers have access to a wide network of private lenders who specialize in equity-based lending. Brokers are also regulated by FSRA (Financial Services Regulatory Authority of Ontario), which means they have a legal duty to explain the risks and costs of your loan up front.

1. Connect With a Broker

Start by talking to a mortgage broker who understands home equity lending. They’ll ask about your current mortgage, your home value, and your financial goals.

2. Gather Your Documents

Most lenders will require your recent mortgage statement, property tax bill, income confirmation, and an appraisal.

3. Broker to Arrange an Appraisal

Lenders will require a home appraisal to confirm how much your property is worth. Your broker will help you arrange this with a lender-approved appraiser.

4. Legal Review and Closing

In Ontario, you’ll need to work with a real estate lawyer to finalize the loan. Once the paperwork is signed and the loan is registered against your home, the funds are released to you — usually within a few days.

How Much Can You Borrow With a Home Equity Loan?

In most cases, lenders in Ontario will let you borrow up to 80% of your home’s value, minus what you still owe on your mortgage. This is called the loan-to-value ratio, or LTV.

An example:

Your home is worth $750,000

You owe $450,000 on your current mortgage

80% of your home’s value is $600,000

That means you may be able to borrow up to $150,000 in home equity

The more equity you’ve built up, the more you can access. In some cases, especially with private lenders, you may even be able to borrow beyond 80%, but this usually comes with higher interest rates and more risk.

Your exact loan amount will also depend on the lender’s comfort level with your credit, income, and repayment plan. But again — equity is the main driver in this type of lending.

Current Home Equity Loan Interest Rates in Ontario

Currently in April 2025, home equity loan interest rates in Ontario generally start at 6.99%, and HELOCs start at 7.49%. Pricing is always given by the lender on a case by case basis.

If you're applying with a reputable and experienced mortgage broker, they’ll compare offers from different lenders to help you find a rate that fits your budget and timeline.

Interest rates on home equity loans in Ontario can vary widely depending on:

Your broker's level of experience

Your property type and location

The amount of equity available and loan-to-value ratio

Credit history

Debt-to-income ratios

Minimum Credit Score for a Home Equity Loan

One of the biggest advantages of a home equity loan — especially through a private lender — is that you can get a home equity loan with bad credit.

While banks offering prime HELOCs may require a credit score of 680 or higher, and B lenders will require a credit score of 550 or higher, private lenders generally have no credit score requirements.

That said, your credit score still plays a role. A lower score might mean a higher interest rate or a lower credit limit, while a higher score could get you better pricing.

The good news? If you’ve built up a lot of equity, that can often make up for weaker credit — especially if you have a clear plan for how you’ll use the loan and repay it.

Minimum Income for a Home Equity Loan in Ontario

With equity-based lending, income is not the main focus, but lenders will still want to see that you can afford the monthly payments. The good news is, they tend to be much more flexible than banks.

You don’t need to be working full-time with a T4. Many private lenders will consider:

Self-employment income

Pension income

Disability benefits

Rental income

Seasonal or part-time work

While there’s no income requirements, you should be able to show that your income is stable enough to cover the loan payments, property taxes, and any other debts you carry.

If you have enough equity, most lenders can arrange home equity loans with no monthly payments. Ask your broker about interest reserves or prepaid interest for a home equity loan.

So, Is a Home Equity Loan a Good Idea?

It can be — if it’s used for the right reason and done through the right broker.

A home equity loan gives you access to money that’s already yours — the equity in your home — without having to sell or refinance your entire mortgage. It can be a useful tool for consolidating debt, funding renovations, or covering major expenses when traditional loans aren’t available.

But remember: you’re borrowing against your savings. If you don’t use the money wisely, or if you can’t repay it, you could risk losing your home.

That’s why it’s so important to work with a licensed mortgage broker who can help you compare offers, avoid shady lenders, and structure a loan that fits your life — not just your property value.