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If you own your own home, it is quite likely your biggest financial investment. For many homeowners, the value of their home is really only significant when it's time to sell and invest that value in a new property. For some, however, there are occasions when it is necessary or prudent to put the value of their home to work for them without selling.

Home equity is the difference between a home’s value and the outstanding mortgage balance on the property. For example, a house valued at $1,000,000 with a $500,000 mortgage balance outstanding on it has $500,000 of available equity.

Your home equity will increase as you reduce the balance of your outstanding mortgage, or increase the value of your home, either through renovations or appreciation in property values.

When is it time to consider leveraging your home equity for other purposes? That depends entirely on your personal circumstances, but home equity is often your greatest financial asset and is worth considering when planning significant projects.

Here are some reasons why you might want to access your home equity.

Home Renovations

One of the more common ways to use home equity is for home renovations. Whether you are simply repainting your home, landscaping your garden, upgrading appliances, hurricane proofing, making necessary repairs, or giving a kitchen or bathroom a complete makeover — renovations improve both your enjoyment of your home while you are in it, and contribute to increasing the value of the property. It may make a lot of sense to use part of the current value of your home to increase its future value.

When planning renovations, consider how they might contribute to the value of your home. Projects considered likely to offer the best return on investment for homeowners include:

  • Upgrades to ensure your home is hurricane and wind-proof
  • Painting: freshens up your space
  • Landscaping and exterior renovations: adds to curb appeal
  • Backyard deck or patio: increases living space
  • Kitchen or bathroom renovation: updates your home and makes it more inviting


Buying a new property

It isn’t always necessary to sell the home you have in order to buy another property. Sometimes, you can use your existing home equity to fund the down-payment on a mortgage for a second home, or to help a family member secure their first mortgage.


Home equity can also be used to fund educational expenses. Studying abroad, in particular, can be costly; students who get their university education in a foreign country can typically expect to graduate with significantly higher debt than the average university student in their home country. Home equity may be used to fund your child’s living and tuition expenses while abroad, reducing the debt they will have to manage after graduation.

Unexpected Events

Of course, sometimes life throws up unpredictable events that require immediate action. Unforeseen expenses can be a major source of financial anxiety. A home equity loan can help you settle unanticipated expenses quickly, potentially reducing interest payments on those expenses and any damage to your credit rating.

Applying for a home equity loan

Here are some of the documents you will need to gather before meeting with a mortgage specialist and applying for a home equity loan.

For educational support or other non-construction purposes:
  • Two forms of valid Photo ID (passport or national identity card, driver’s license)
  • Proof of permanent address (e.g., a utility bill)
  • Proof of employment and a recent payslip. If you’re self-employed, financial statements for past 3 years along with cash-flow projections for next 12 mos
  • Existing property deed
  • Recent land tax / building tax receipt
  • Current property valuation


For construction/renovation projects:
  • All of the above documents
  • Approved building plans
  • Copy of builder/contractor’s estimates
  • Two reference letters for the contractor/builder
  • Surveyors report

Some of the documents required vary by jurisdiction. RBC offers a complete checklist of documents by country that can be found here:

Your home equity can be one of your most significant and flexible financial assets. To find out more about your options for accessing your home equity, talk to your mortgage specialist.

This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.