Borrowing Against Your Home Equity

When someone is in need of funds for various reasons such as Debt Consolidation, Renovations, Travelling, etc., you may have the option to use the Equity in your Home as a Second Mortgage, Home Equity Line of Credit or a Loan or Line of Credit secured by your home, upon approval from a Financial Institution.

What is Home Equity?

Home equity is the difference between the value of your home and the unpaid balance of your current mortgage.

For example, if your home is worth $200,000.00 and you owe $150,000.00 dollars on your mortgage, you have $50,000.00 in home equity.

Your home equity goes up in two ways:

  • The more you pay down your Mortgage
  • If the value of your home increases

You may have the option to borrow up to 80% of the appraised value of your home, minus what you have left to pay on your mortgage.

The Positives of Using Home Equity;

  • Interest rates can be much lower than regular loans and Credit Cards
  • Having a fixed rate on a Secured Equity Loan/Second Mortgage can provide simplicity in budgeting as your payment remains the same and you know your exact term
  • On a Secured Line of Credit, you have the option to pay interest only freeing up cash for you to use for other items
  • On a Secured Line of Credit, you have the option to draw what you require up to your maximum limit

The Negatives of Using Home Equity;

  • You can lose your home if you are unable to repay the Equity Loan or Secured Line of Credit.
  • On a Home Equity Line of Credit, the interest rates are not fixed so they can go up.
  • On a Home Equity Line of Credit, the minimum interest payment is a floating rate so you will not know what you are required to pay each month as it is based on what the prime rate is
  • If property values decline, you can lose all the Equity in your home


To qualify for any option using your Home Equity, you will have to contact your Financial Institution to apply and most banks require you to pass a “stress test”. You will be required to have a good Credit Score and a low debt to income ratio. You may also require an appraisal on your home to confirm the exact value of your home.

If you have Debt to consolidate and it is not an option to use the Home Equity you have, please call us toll free 1-800-565-4595 or email us anytime for a free consultation and we can see what other consolidation options that are available.