You can use your house as security for a home equity loan. Lenders in Canada must ensure that you have a proper loan-to-value ratio (LTV) and that you genuinely have home equity before approving your application for a home equity loan. Check out our home equity loan calculator to see how it might impact your financing.

Lenders won’t be eager to let you borrow against your equity if your LTV is high because it indicates that your equity is poor.

You receive the entire amount at once and at a fixed interest rate through a home equity loan in Canada. HELOCs operate more like credit cards in that you can borrow as much money as you need, subject to a cap. HELOCs feature adjustable or variable interest rates.

This means that while your monthly payment may change, you only pay interest on the amount you draw from the account.

To begin evaluating cost possibilities for using the equity in your home as a source of funding, use a home equity loan calculator. With the help of this calculator, you can estimate your eligibility for a home equity loan, the amount you might be able to borrow, and the total cost.

How To Calculate The Payments On A Home Equity Loan

The Home Equity loan calculator estimates your potential borrowing capacity, but it does not estimate your monthly payment amount. Equal monthly payments are required for a home equity loan. Three things determine the monthly payments:

Loan amount

This is the home equity amount borrowed.

Loan period

The loan period provides a timeline for when the debt must be repaid. If the loan amount and interest rate remain the same, a longer term will lead to lower monthly payments, but the total amount of interest paid over the length of the loan will increase.

Interest rate

This is the percentage rate on the loan borrowed.  A longer loan period typically comes with a higher interest rate.

Divide the outstanding sum of your mortgage by the current value of your house to find the maximum amount you might be able to borrow with a home equity loan. Here is your LTV.

Lenders may require an LTV of 80% or less depending on your credit history, meaning that your home equity must be at least 20% higher. Up to 80% of your house’s total value is normally available to you. A home equity loan may not be available to you if you have less than 20% equity.

Thanks for checking out our home equity loan calculator.

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