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How to Take Equity Out of Your Home in Canada

A guide to taking equity out of your home

A guide to taking equity out of your home

When thinking about how to pull equity out of your home, there’s various methods and strategies that you can use without having to sell it or withdraw a costly personal loan. These options can allow you to access much needed funds for personal, business, or investment reasons, and let you do so by leveraging the highly competitive real estate market.

Housing prices are on the rise across Canada, especially in the most populated provinces like Ontario and British Columbia. The average Canadian homeowner is sitting on a considerable amount of equity just by owning one or more homes across the country.

So before you consider taking on debt with high interest rates, or worse yet, selling your living space, let’s go over the three main options you have when considering how to take equity out of your home.

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How to Take Equity Out of Your Home in Canada

What are the advantages of taking equity out of a home?

Pulling equity out of your home leads to much more affordable interest rates than personal loans, which is great for Canadians looking to save money as much as possible. They’re a great option for emergency funding, and also for large expenses like wedding costs, college funds, renovations, and so on. These amounts are quite small compared to real estate values and the home equity you’ll likely have built up.

When you take equity out of your home, you’ll also have a lot of flexibility with the way you withdraw funds, which can make it more appealing compared to the rigid terms and conditions you’d usually find with other loan options.

Cash-out refinance

A cash-out refinance is one way to take equity out of your home without selling. This process involves refinancing your current home for a larger amount to withdraw the difference in cash. Essentially, you’re increasing the amount you owe on your existing mortgage to get funds in hand.

Many Canadians consider this option first when looking into how to take equity out of their homes in Ontario, B.C, and other provinces with higher populations. Living space is valuable in populated areas, and having close access to amenities and other benefits mean that Canadians are ready to extend their mortgage rather than sell their homes.

However, a cash-out refinance also means larger monthly mortgage payments, which can be difficult for some homeowners to keep up with based on their income and other expenses. If you’re sure your finances can handle the additional payment amount per month, this can be a good option when looking to pull equity out of your home for your needs.

Home Equity Line Of Credit (HELOC)

A home equity line of credit, or HELOC, is easy to understand, since it works very similarly to a credit card. You can withdraw loan amounts multiple times across a period of time (known as the draw period) against your home equity, and some lenders might even give you a card that you can use for this.

A HELOC lets you take equity out of your home as needed, but you can’t withdraw past your limit. This limit is also based on how much equity you actually have—the smaller the equity, the smaller your limit.

The draw period usually lasts anywhere from 10-20 years, but after that time has passed, you must pay back the full amount you borrowed. You should also note that you’ll be paying higher interest rates on the borrowed amount compared to a cash out refinance. But if you’re looking to withdraw a smaller amount and plan to pay it back quickly, then a HELOC might be a good option for you to pull equity out of your home.

Home equity loan

A home equity loan is easy to understand and works very simply to take equity out of your home. The process involves withdrawing a predetermined amount out of your home equity with interest, which you’ll immediately receive as cash.

You’ll also immediately start repaying the home equity loan back using monthly payments, which you will often receive separately with your existing mortgage payments.

This is the best option if you are considering how to take equity out of your home at a fixed interest rate and if you only need to withdraw a specific amount of funds the one time. Since the rate of interest and amount withdrawn is fixed, you’ll know exactly how much you owe from month to month and can plan your repayment accordingly.

Tap into your home equity with Alpine Credits

If you are wondering about the best way to take equity out of your home, Alpine Credits has you covered. We have over 50 years of experience helping Canadians tap into their home equity and get access to quick and reliable financing. Unlike other lenders, we aren’t concerned with your age, credit, or income history—our loans are flexible and based entirely on how much equity you have available to access.

Apply now or call us today to speak with someone on our team and let us help you learn how to take equity out of your home and get the funds you need.

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