If you own a home in Ontario and need access to a lump sum of money, you may be able to borrow against your home equity without selling your property. A home equity loan in Ontario is often structured as a second mortgage behind your existing first mortgage, giving you a lump sum that can be used for a range of financial needs.
Banks also offer HELOCs, which work differently and generally have a 65% loan-to-value limit. In this guide, we’ll explain how much you may be able to borrow, current 2026 rates and fees, payment examples, qualification requirements—including options for low credit or irregular income—and the tax rules and risks you should understand before borrowing against your home.
Key Takeaways
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How much can you borrow? Most lenders allow total mortgage debt of around 75%–80% of your home’s value. Bank HELOCs generally have a 65% limit.
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What are the rates? Private second mortgages in Ontario are often around 8%–15%, while bank HELOCs are typically priced at prime plus 0.5%–1.5%.
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What are the costs? Expect possible lender and broker fees, along with legal and appraisal costs.
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How fast can you get the money? Private lenders can sometimes approve applications within hours and fund within 24–72 hours, while banks may take longer.
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Is the interest tax-deductible? Generally, interest on money borrowed for personal expenses or debt repayment isn’t tax-deductible in Canada.
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What’s the biggest risk? Your home secures the loan. If you can’t make the payments, you could ultimately face power of sale proceedings.
What is a home equity loan in Ontario?
A home equity loan lets you borrow money using the equity you’ve built in your home as security. Your equity is simply the difference between your home’s current value and what you still owe on your mortgage and other loans secured against the property.
For example, if your Ontario home is worth $800,000 and you owe $400,000 on your mortgage, you have about $400,000 in equity. However, you usually can’t borrow all of that equity because lenders apply loan-to-value (LTV) limits.
Terms that mean "home equity loan" in Canada
Depending on your situation, borrowing against home equity can take several forms:
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Second mortgage: A lump-sum loan secured by your home and registered behind your first mortgage.
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Third mortgage: An additional mortgage registered behind your first and second mortgages.
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HELOC: A revolving line of credit that lets you borrow against your home equity as needed.
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Equity takeout/refinance: Replacing your existing mortgage with a larger one and taking the extra amount as cash.
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Reverse mortgage: A home-equity option generally available to homeowners 55 and older, which typically doesn’t require regular mortgage payments.
How does a home equity loan work?
With a second mortgage, you borrow a lump sum using the equity in your home as security. The lender looks at your home’s value, existing mortgage, available equity and overall situation before approving the loan.
Private second mortgages are often structured with interest-only monthly payments, meaning the principal is usually repaid when the term ends—often through refinancing, selling the property or arranging another mortgage.
Terms that mean "home equity loan" in Canada
The process generally works like this:
1. Apply: A lender or mortgage broker reviews your property, equity and financial needs.
2. Property valuation: An appraisal or other valuation confirms the home’s current value.
3. Loan approval: You receive the rate, fees, term and other conditions in a commitment.
4. Legal closing: A lawyer registers the second mortgage on your property title.
5. Receive the funds: The money is advanced, less any applicable fees deducted at closing.
6. Make payments: You make the required monthly payments and repay or refinance the principal when the term ends.
One benefit is that your existing first mortgage stays in place. This can be useful if you have a low mortgage rate and don’t want to break that mortgage and potentially pay a penalty.
About the Author
Faizal Garasia is a licensed mortgage broker (FSRA Lic. #10557) with over 15+ of experience arranging private, alternative, and traditional mortgage financing across Ontario.He specializes in helping homeowners in arrears, self-employed borrowers, and clients facing power of sale compare their financing options side by side.