4 Ways to Access Your Home Equity

Tim Lyon • December 7, 2023

If you've been a homeowner for many years, it is likely your property value has increased significantly. One advantage of homeownership is the opportunity to build equity. Home equity growth, partnered with the security of living in your own home, is why most Canadians believe homeownership is the best choice for them!

 

While home equity is one of your greatest assets, accessing home equity is often overlooked when putting together a comprehensive financial plan. So if you’re looking for a way to access some of your home equity, you’ve come to the right place!

 

Simply put, home equity is the actual market value of your property minus what you owe. For instance, if your home has a market value of $650k and you owe $150k, you have $500k in home equity.

 

If you want to stay in your home but also access the equity you have built up over the years, there are four options to consider.

 

Conventional Mortgage Refinance

 

Assuming you qualify for the mortgage, most lenders will allow you to borrow up to 80% of your property’s value through a conventional refinance.

 

Let’s say your property is worth $500k and you owe $300k on your existing mortgage. If you were to refinance up to 80%, you would qualify to borrow $400k. After paying out your first mortgage of $300k, you’d end up with $100k (minus any fees to break your mortgage) to spend however you like. 

 

Even if you paid off your mortgage years ago and own your property with a clear title (no mortgage), you can secure a new mortgage on your property.

 

Reverse Mortgage

 

A reverse mortgage allows Canadian homeowners 55 or older to turn the equity in their home into tax-free cash. There is no income or credit verification; you maintain ownership of your home, and you aren't required to make any mortgage payments. The full amount of the mortgage will become due when you decide to move or sell.

 

Unlike a conventional mortgage refinance, reverse mortgages won’t allow you to borrow up to 80% of your home equity. Rather, you can access a lesser amount of equity depending on your age.

 

The interest rates on a reverse mortgage can be slightly higher than the best rates currently being offered through standard mortgage financing. However, the difference is not outrageous, and this is an option worth considering as the benefits of freeing up cash without mortgage payments provides you with increased flexibility. 

 

Home Equity Line of Credit (HELOC)

 

A Home Equity Line of Credit allows you to set up access to the equity you have in your home but only pay interest if you use it. Qualifying for a HELOC may be challenging as lender criteria can be pretty strict. Unlike a conventional mortgage, a HELOC doesn't usually have an amortization, so you're only required to make the interest payments on the amount you've borrowed.

 

Second Position Mortgage

 

If the cost to break your mortgage is really high, but you need access to cash before your existing mortgage renews, consider a second mortgage.

 

A second mortgage typically has a set amount of time in which you have to repay the loan (term) as well as a fixed interest rate. This rate is usually higher than conventional financing. After you have received the loan proceeds, you can spend the money any way you like, but you will need to make regular payments on the second mortgage until it's paid off.

 

If you’re looking for a way to access the equity in your home to free up some cash, please get in touch. You’ve got options, and we can work together to find the best option for you!

Tim Lyon

Mortgage Consultant

How Pre-Payments Can Save You Time and Money

By Tim Lyon • September 23, 2025
Did you know you could pay off your mortgage years earlier — and save thousands in interest — just by making extra payments? It doesn’t take a massive lump sum to make a big difference. Even small, regular pre-payments can add up over time. In this blog, we’ll look at what pre-payment privileges are, how they work, and how to use them to your advantage. What Are Pre-Payment Privileges? Pre-payment privileges are options built into many mortgages that allow you to pay extra toward your principal balance without penalty. Since regular mortgage payments include both principal (the loan amount) and interest (the cost of borrowing), paying down extra principal early reduces the total interest you’ll pay over the life of your mortgage. Most lenders offer at least one of the following: Lump sum payments (up to a certain percentage of the original mortgage each year) Double-up payments (making two regular payments at once) Payment increases (raising your regular payment by a set percentage) Example: The Impact of a 1% Pre-Payment Let’s say you have a $500,000 mortgage with: 25-year amortization 5.25% interest rate If you make a $5,000 lump sum payment every year (about 1% of the mortgage amount), here’s the difference: With no pre-payments, the numbers look like this: Total Pre-Payments: $0 Total Paid Over Time: $898,871 Interest Paid: $398,872 Time to Pay Off Mortgage: 25 years Now compare that to making just one $5,000 lump sum pre-payment each year : Total Pre-Payments: $95,000 Total Paid Over Time: $806,078 Interest Paid: $306,078 Time to Pay Off Mortgage: 19 years and 8 months That means by making manageable yearly pre-payments, you’d save almost $93,000 in interest and become mortgage-free more than 5 years earlier . Other Pre-Payment Options Double-Up Payments This option lets you double your regular mortgage payment whenever you choose, accelerating principal repayment significantly. Payment Increase Privilege Most lenders allow you to increase your regular payment by up to 15% once per year. Which can be a manageable and consistent way to get ahead because the additional payment still goes directly towards the principal. Why Pre-Payments Matter Save Thousands: Reduce the lifetime interest you pay Pay Off Faster: Shorten your mortgage term by years Build Equity Quicker: Increase the value you own in your home sooner Things to Keep in Mind Every lender has different rules about when and how you can make pre-payments Some allow flexible payments anytime; others limit them to specific dates Minimum pre-payment amounts usually apply (often $100 or more) If you’re not sure about your lender’s policy, ask — or I can help you find out. Quick Summary • Lump Sum Payments: Extra payments directly against your mortgage balance • Double-Up Payments: Pay twice your regular installment for faster repayment • Payment Increases: Raise your monthly payment within set limits • Bottom Line: Even small pre-payments can add up to big savings over time Next Steps If becoming mortgage-free faster sounds appealing, review your pre-payment options and start small. Even $100 extra here and there can have a meaningful impact. If you’d like help building a pre-payment strategy that fits your budget, I’m here to guide you. Book a consultation or call 778-988-8409 .  Mortgage Term Glossary Amortization: Total length of time to fully repay your mortgage (usually 25–30 years in Canada) Interest: The cost of borrowing money, charged by the lender as a percentage of your loan balance Lump Sum Payment: An extra payment made directly toward your mortgage balance Payment Increase Privilege: An option to raise your regular mortgage payments within lender limits Pre-Payment Privilege: Contractual allowance to make extra payments without penalty Principal: The original loan amount, not including interest

How Debt Impacts Your Borrowing Power

By Tim Lyon • September 22, 2025
Have you ever wondered how your car loan, credit card balance, or line of credit might affect your ability to qualify for a mortgage? For many buyers, non-mortgage debts play a bigger role than they realize in shaping what lenders will approve. In this blog, we’ll break down how debts impact your borrowing power, why lenders look closely at them, and what practical steps you can take if you’re preparing to buy a home. Understanding Borrowing Power Your borrowing power is primarily determined by your income. If you earn $1,000 per month, no lender will approve a loan requiring $990 in monthly payments, because that would leave you only $10 for all other expenses—a clear recipe for financial trouble. There are two thresholds lenders look at to evaluate your maximum mortgage: The first is the Gross Debt Service (GDS) ratio , which typically allows about 39% of your gross income to go toward a stress-tested mortgage payment and housing costs. The second is the Total Debt Service (TDS) ratio , which looks at all debts combined. It is typically capped around 44% of your gross (before-tax) income and includes: Stress-tested mortgage payment Property taxes Heating costs Any other monthly debt payments How Debts Reduce Borrowing Power For insured mortgages that follow the standard thresholds of 39% and 44%, you can have the equivalent of 5% of your gross income in additional debts before they start to reduce your borrowing power. For uninsured mortgages, exceptions can often increase the GDS limit to 44%, meaning any additional debts directly reduce your borrowing power. Because of this 44% threshold, every dollar of monthly debt requires about $2.27 in additional monthly income to offset it. Since most people can't quickly increase their income, let's look at how debts reduce your borrowing power. Key Math Every $100 in monthly debt payments reduces your mortgage borrowing power by approximately $13,500. (Calculation based on a 4.5% interest rate with a 6.5% stress test qualification and 25-year amortization) That means: A $500/month car loan = about $67,000 less borrowing power A $200/month line of credit = about $27,000 less borrowing power Note: Credit cards that are paid off in full each month do not impact your borrowing power. However, carrying a balance will work against you. Key Benefits of Managing Debt Wisely • Maximize home options – Less debt means more borrowing room for your mortgage. • Lower stress during approval – Fewer debts make qualification smoother. • Flexibility in budgeting – Reduces the risk of stretching yourself too thin financially. Important Considerations • Not all debt is bad — car loans, student loans, or lines of credit can make sense at the right time. • The danger comes when new debts are added while you’re actively shopping for or closing on a home — this can jeopardize approval. • Always talk with your mortgage broker before taking on new credit if you plan to buy soon. Real-World Example Scenario: Couple with household income of $100,000 20% down payment Already carrying a $400/month car loan Impact: Without the loan, they could qualify for around $480,000 mortgage. With the loan, that drops by about $61,000 , reducing their maximum approval to $419,000 . That $61,000 difference could determine whether you qualify for your preferred home or have to settle for a less expensive option. Next Steps If you’re planning to buy a home soon, review your current debts and see how they may affect your approval. Even small payments can make a big difference in how much you qualify for. If you’d like a personalized analysis of how your debts might impact your mortgage options, I’d be happy to help. Book a consultation or call 778-988-8409 Mortgage Term Glossary Borrowing Power: The maximum mortgage amount a lender will approve based on your income, debts, and other factors. Equity: The portion of your home you truly own, calculated as home value minus mortgage balance. Gross Debt Service (GDS) Ratio: A measure of how much of your gross income can go toward housing costs (mortgage payment, property taxes, heating, and sometimes condo fees). Lenders typically cap this at 39%, though exceptions may apply if you have more than 20% down. Gross Income: How much you make before taxes. Stress Test: A requirement that you qualify at a higher interest rate than your actual rate, to ensure affordability. Total Debt Service (TDS) Ratio: A measure of how much of your gross income can go toward all debt obligations (housing costs plus other monthly debt payments). Lenders typically cap this at around 44%, though exceptions may apply if you have more than 20% down. Need help with your mortgage?