Borrowing from the equity in your home in hard financial times or when you need emergency cash for medical bills, tuition, home renovations, or other large life expenses, can be a great decision.

The equity in your home is the portion of the home that you’ve already paid for, both in the forms of your mortgage payment and the down payment you most likely paid when you bought the home originally. When large amounts of money are needed or small amounts of money over a large period of time, a home equity loan or home equity line of credit can be the answer. But when applying for these loans homeowners have one question: how much can I borrow from my equity on my house in Toronto?

Generally lenders in Toronto will let you borrow up to 80% of your home equity or rather, the value you have in your home.

In its most basic form, this would mean that you could borrow up to 80% of what you’ve already paid in your mortgage and your down payment; but loans on home equity can become a bit more complicated than that. This is because your home equity can increase in one of two ways. The first is one that’s already been discussed – by simply paying down your loan. The second, bit more complicated, way to increase your home’s equity is to increase its value. Because of this, things like home renovations and remodels can increase the value, thereby increasing your equity, and ultimately increasing the amount you can borrow against.

While an 80% loan-to-value ratio is generally the standard that lenders will abide by when determining how much you can borrow from equity on your house in Toronto, some might consider higher ratios as well. Depending on your own situation, the Toronto neighbourhood in which your home is located, and the lender you’re dealing with, loan-to-value ratios on loans based on home equity can be as high as 85% or 90%. It is important to note however, that when homeowners need to borrow more than 80% of their home equity, the interest rate generally increases, as the risk to the lender increases.

Depending on the lender that you’re working with, both your credit history and the amount of home equity you have could be considered upon application. Generally banks and other major lenders in Toronto will look at both, while smaller lenders such as credit unions and private lenders will generally only look at the amount of equity in your home. This is another element of these loans that make them so attractive to homeowners, especially those who have let their credit score slip since buying their home.

When wondering, “how much can I borrow from my equity on my house in Toronto,” first determine the value of your home, and then determine how much you still have left on your mortgage loan. Subtracting the mortgage amount from the value will tell you how much equity you have, and how much you’ll be able to borrow against it.

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