Definition
Home equity is the portion of your property that you actually own: current market value minus outstanding mortgage balance. If your home is worth $500,000 and you still owe $300,000, your equity is $200,000.
Equity grows in two ways: gradual principal repayment (each mortgage payment reduces the balance) and appreciation in the property's market value. In Canada, homeowners can access a portion of this equity through refinancing or a home equity line of credit (HELOC), up to a maximum of 80% of market value minus the mortgage balance.
Home equity is a key indicator for lenders when refinancing or applying for a home equity product: the higher it is, the broader the financing options and the more favourable the rates.