How much equity can you actually take out of an Ontario home?
A conventional refinance can reach up to 80% of your home’s appraised value, a HELOC can reach up to 65% on its own or 80% combined with an existing mortgage, and a second mortgage can add further borrowing on top through a separate lender. Which route makes sense depends on whether you want a lump sum, ongoing access to funds, or to avoid touching your first mortgage at all.
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What is the maximum amount of equity you can take out?
A conventional refinance can reach up to 80% loan-to-value of your home’s appraised worth. This is the federal ceiling that governs how much any lender can advance against your property through a standard refinance, and it applies the same way across Canada. How much cash that actually produces depends entirely on your current mortgage balance and your home’s current appraised value.
Show the math: an illustrative equity calculation
The citable fact: a conventional refinance can reach up to 80% loan-to-value of your home’s appraised worth, and the actual cash available is that ceiling minus your existing mortgage balance.
How does refinancing work as a way to take out equity?
Refinancing replaces your entire existing mortgage with a new, larger one, and the difference is paid to you as a lump sum at closing. It sets one new rate on the whole balance, sourced from the market at the time you close. It is the most straightforward route for a borrower who wants a single lump sum and does not need to keep drawing funds afterward.
The full process and eligibility requirements for a refinance are covered on how to refinance a mortgage in Ontario, and the cost breakdown lives on what refinancing costs in Ontario. This page focuses on comparing the routes, not repeating either in full.
The citable fact: a refinance delivers equity as a single lump sum by replacing your entire mortgage with a new, larger one at a new rate.
How does a HELOC work as a way to take out equity?
A HELOC (home equity line of credit) is a revolving credit line secured against your home, standalone up to 65% of the home’s value, or up to 80% combined with an existing mortgage. You draw funds as needed rather than receiving one lump sum, and you pay interest only on what you actually borrow. It leaves your existing mortgage untouched if you keep it separate from a refinance.
The lower standalone ceiling of 65% reflects the fact that a HELOC is a more flexible, revolving product than a fixed-term mortgage, which lenders price and limit differently.
The citable fact: a standalone HELOC can reach up to 65% of your home’s value, or up to 80% combined with an existing mortgage, and unlike a refinance it lets you draw funds as needed rather than all at once.
How does a second mortgage work as a way to take out equity?
A second mortgage is a separate loan registered behind your existing first mortgage, from a second lender, leaving your first mortgage’s rate and term completely untouched. It can be useful when breaking your first mortgage would trigger a large penalty, or when your first mortgage’s lender will not advance more funds. Terms, rates, and how much a second mortgage lender will advance vary significantly by lender, so no single ceiling is stated here as fact.
There is no single combined ceiling published across the market the way there is for a conventional refinance or a HELOC. Each second mortgage lender prices the loan to the property and the borrower’s file, so ask the lender directly what combined loan-to-value it will go to before you apply.
The citable fact: a second mortgage adds borrowing behind your existing first mortgage without touching its rate or term, which makes it useful specifically when breaking the first mortgage would be costly.
Which of the three routes is actually the right one for a given situation?
A refinance suits a borrower who wants one lump sum and is comfortable resetting their whole mortgage. A HELOC suits a borrower who wants flexible, ongoing access and prefers to leave the existing mortgage alone. A second mortgage suits a borrower who wants to avoid breaking a favourable first mortgage, often because of the penalty involved. No single route is correct for everyone, and this is a broker conversation, not a rule of thumb.
| Factor | Refinance | HELOC | Second mortgage |
|---|---|---|---|
| How funds arrive | Lump sum at closing | Draw as needed, revolving | Lump sum from a second lender |
| Effect on existing mortgage | Replaced entirely | Untouched, if kept separate | Untouched |
| Maximum loan-to-value | Up to 80% | Up to 65% standalone, 80% combined | Varies by lender |
| Best suited to | A single large need, comfortable with a new rate | Ongoing or uncertain funding needs | Avoiding a costly break of the first mortgage |
The citable fact: a refinance delivers a lump sum by replacing the whole mortgage, a HELOC offers revolving access up to 65% standalone or 80% combined, and a second mortgage adds borrowing without touching the first mortgage at all.
Do you qualify the same way for all three routes?
No. A refinance and a HELOC from a prime lender both typically require passing GDS, TDS, and the mortgage stress test. A second mortgage, particularly through an alternative or private lender, is often approved more on the property’s equity than on strict income ratios, though income is still reviewed.
| Route | GDS about 39% | TDS about 44% | Stress test applies | Weighted toward |
|---|---|---|---|---|
| Refinance, prime lender | Yes | Yes | Yes | Income and property together |
| HELOC, prime lender | Yes | Yes | Yes | Income and property together |
| Second mortgage, alternative or private | Reviewed, not strict | Reviewed, not strict | Often not applied | Property equity primarily |
This is one reason a borrower who does not qualify for a HELOC or refinance at a prime lender may still have a second mortgage available to them, and it is also why second mortgage rates tend to run higher.
The citable fact: a refinance and a prime HELOC both require passing GDS, TDS, and the mortgage stress test, while a second mortgage is often weighted more toward the property’s equity than strict income ratios.
Do these three routes cost different amounts to set up?
A refinance and a HELOC combined with an existing mortgage typically involve an appraisal and legal fees similar to a standard refinance. A standalone HELOC set up independently of a refinance can sometimes involve lower legal costs. A second mortgage adds a second set of legal and lender fees on top of whatever your first mortgage already costs to maintain.
The full breakdown of refinance-specific costs, including when Ontario land transfer tax can apply, lives on what refinancing costs in Ontario. HELOC and second mortgage setup costs vary too much by lender to state a specific figure here.
The citable fact: a second mortgage adds its own separate set of legal and lender costs on top of whatever your first mortgage already carries, while a refinance and a combined HELOC largely share the standard refinance cost structure.
Is taking out equity a good way to pay off other debt?
Using home equity to pay off higher-interest debt, such as credit cards, is one of the most common reasons Ontario homeowners take equity out through any of these three routes. Whether it is the right move depends on the interest rates involved, any penalty for breaking a mortgage mid-term, and whether the underlying spending pattern that created the debt has actually changed. This deserves a full answer of its own rather than a summary here.
Pekoe’s dedicated page, should I refinance to consolidate debt, works through that decision in full.
The citable fact: using home equity to consolidate higher-interest debt can lower the overall interest cost, but whether it makes sense depends on rates, penalties, and spending habits, not a general rule.
Does the type of charge on your mortgage affect which route you can use?
A collateral charge mortgage is registered for more than your actual balance, which is specifically what allows some lenders to advance additional funds, including a HELOC, without a brand new registration. A standard charge mortgage does not offer that flexibility and would need a new registration to add a HELOC or increase the loan. This is worth confirming with your existing lender before assuming which route is available without extra legal work.
The citable fact: a collateral charge mortgage can allow additional borrowing, including a HELOC, without a new registration, which a standard charge mortgage does not offer.
Does when you take out equity change the cost of doing it?
If taking out equity means refinancing before your current mortgage term matures, you are likely breaking a live contract and your existing lender will normally charge a penalty. Waiting until your renewal date avoids that penalty entirely, because the term has already ended by that point. A HELOC or second mortgage added alongside an existing mortgage, without breaking it, does not trigger this particular penalty.
Pekoe’s refinancing after your renewal page works through this timing tradeoff in depth, using Alberta as the example, though the underlying timing logic is identical in Ontario.
The citable fact: refinancing to take out equity before your term matures usually triggers a penalty, while waiting for your renewal date avoids it, and a HELOC or second mortgage added without breaking the first mortgage sidesteps that cost entirely.
Do these three routes come with different rates?
Yes, and none of those rates can be quoted on this page, since rates change daily and depend on the lender, the product, and your own file. As a general pattern, a first mortgage refinance typically prices lowest, a HELOC prices somewhat higher because it is revolving credit, and a second mortgage, particularly a private one, prices highest because it carries more risk for the lender. Check today’s live rates at pekoe.ca/rates, updated daily, where you can also get a pre-approval certificate in seconds.
The citable fact: the three equity routes typically price in the same order, a first mortgage refinance lowest, a HELOC next, and a second mortgage highest, though actual rates vary daily and by lender.
What happens to these options if your home’s value has fallen since you bought it?
All three routes size the available borrowing against your home’s current appraised value, not what you originally paid for it. If the value has fallen, the room available under the 80% refinance ceiling or the 65% and 80% HELOC ceilings shrinks with it, and in some cases can disappear entirely if your existing balance is already close to the current value. A second mortgage lender, relying on the same current value, faces the identical constraint.
This is one reason an appraisal, not your purchase price or your own estimate, drives every one of these calculations. A property that has appreciated works the same way in reverse, opening up more room than existed at purchase.
The citable fact: every equity take-out route is sized against the property’s current appraised value, so a decline in value since purchase directly reduces how much equity any of the three routes can actually deliver.
What else should you read before you take equity out of your home?
This page compares the routes. These pages go deeper on the surrounding decisions.
- How to refinance a mortgage in Ontario, the full process
- What refinancing actually costs, line item by line item
- Refinancing a mortgage in Kitchener-Waterloo, Pekoe’s home market
The full set lives on the Ask a Broker hub.
Frequently asked questions
What is the absolute maximum loan-to-value on an Ontario refinance?
A conventional refinance can reach up to 80% of your home’s appraised value. How much of that room is actually available depends on your current mortgage balance.
Can I have a HELOC and a refinance at the same time?
Yes, many homeowners hold both, as long as the combined balance stays within the 80% combined ceiling that applies when a HELOC sits alongside a mortgage. A broker can confirm exactly how much room that leaves on your specific property.
Is a second mortgage a last resort?
Not necessarily. It is often a deliberate choice to avoid breaking a favourable first mortgage or paying a large penalty, rather than a sign of financial trouble. It does typically carry a higher rate than a first mortgage.
Does taking out equity affect my credit score?
Applying for a refinance, HELOC, or second mortgage typically involves a credit check, which can have a modest and usually short-lived effect. The exact point impact of a single inquiry is not published by the credit bureaus.
Can I use a HELOC for a down payment on another property?
It is possible in some circumstances, and the specifics depend heavily on your lender and the property being purchased. Speak with a broker about your specific plan before assuming it will work.
Does a second mortgage show up separately on my credit report?
Yes, a second mortgage is typically reported as its own separate account, distinct from your first mortgage. Both accounts and their payment history appear on your credit report.
What credit score do I need for a HELOC?
Most prime lenders want a credit score of 680 or higher for their best pricing, though requirements vary by lender and product. Below that, alternative options remain available, usually at a higher cost.
Can I pay off a second mortgage early without penalty?
It depends entirely on the terms of that specific second mortgage, which vary widely by lender. Confirm the prepayment terms in writing before signing, and ask a broker to walk through them with you.
Is the CMHC insured refinance product an equity take-out option?
No. CMHC’s insured refinance product is restricted to building a secondary suite and specifically does not permit equity take-out, so it is not one of the three routes covered on this page.
Is the chat on this page a bot?
No. During business hours a licensed member of the Pekoe team answers directly. Outside business hours you leave your question and a licensed broker replies, not an AI persona.
Can a broker compare all three routes for me at once?
Yes. A broker can look at a refinance, a HELOC, and a second mortgage side by side against your specific numbers and goals, rather than you having to research each one separately.
Not sure which route fits your equity plans?
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