Home Equity Loan Calculator

What Is a Home Equity Loan?

A home equity loan is a lump-sum loan secured by your home's equity, typically issued for a 1-year term with interest-only payments. At the end of the term, the principal balance is due in full or the loan is renewed. This makes it ideal for homeowners who need short-term access to a specific amount of capital.

Home Equity Loan vs. HELOC

While both products let you borrow against your home's equity, they work quite differently:

• Lump sum vs. revolving: A home equity loan provides one lump sum upfront. A HELOC lets you borrow, repay, and borrow again up to your limit.
• Fixed term: Home equity loans are typically issued for a 1-year term and renewed annually, while HELOCs remain open as long as the credit facility is in place.
• Interest-only payments: Both home equity loans and HELOCs typically require interest-only monthly payments, keeping your cash flow manageable.

Common Uses for a Home Equity Loan

Homeowners commonly use home equity loans for:

• Home renovations: Finance major improvements that can also increase your property value.
• Debt consolidation: Pay off high-interest credit cards and loans at a much lower fixed rate.
• Major purchases: Fund education, a vehicle, or other significant expenses at rates far lower than unsecured loans.
• Emergency fund: Access a large sum for unexpected financial needs while keeping costs predictable.

How Much Can You Borrow?

In Canada, most lenders allow you to borrow up to 80% of your home's appraised value, minus your existing mortgage balance. For example, if your home is worth $600,000, your maximum combined borrowing (mortgage + home equity loan) is $480,000. If you owe $350,000 on your mortgage, you could potentially borrow up to $130,000 through a home equity loan.