Explained
Home equity and loan-to-value: where the 80% line sits
Equity is not what your house is worth minus what you owe. For every purpose that matters it is that number measured against a threshold your lender enforces.
Written by Hermann Gael Nang-Song · Last reviewed August 25, 2026Founder of LoonieLodge Inc., and author of the Canadian mortgage engine this site runs on.
Loan-to-value is the number lenders actually use
Loan-to-value is your balance divided by the property's value, and it is the ratio every mortgage rule in Canada is written against. Under 80% is a conventional mortgage; above it the loan is high-ratio and cannot exist without default insurance, which is why 20% down is the threshold everybody knows.
The same line governs refinancing, and this is where people are caught out. You can borrow against your home up to 80% of its value — not up to your equity. Those are the same number only when you owe nothing. On any mortgage still running, the amount you can actually access is 80% of the value *minus the balance you already owe*, and the difference between that figure and your equity is the 20% the lender will not lend against.
A standalone home equity line of credit stops lower still, at 65% of the value. A HELOC combined with an amortizing mortgage can reach the same 80%, provided the revolving portion stays under 65% on its own.
Which is why a valuation moves more than it looks like it should
Because the ceiling is a percentage of the value and your balance is fixed, every dollar the property appraises for adds eighty cents of borrowing room — until the balance is cleared, at which point there is nothing left to subtract. The table below shows the effect: on an unchanged balance, two valuations $75,000 apart differ by $60,000 in what could be borrowed.
It also means a valuation that comes in low does not merely reduce your options proportionally; below a certain value there are no options at all, because 80% of it does not exceed what you already owe. That is the row in the middle of the table, and it is the position a lot of borrowers were in after 2022.
The lender's valuation is the one that counts, not a listing site's estimate and not what a neighbour's house sold for. An appraisal is ordered by the lender and paid for by you, and it is the first thing to establish if any of this is load-bearing for a plan.
Worked example
One balance, four valuations
A $380,000.00 balance. Each row is the same debt against a different appraised value, with the refinance ceiling at 80.00% of value and the last column showing what is left after the existing balance is paid out.
| Value | Loan-to-value | Equity | Could borrow to | Available |
|---|---|---|---|---|
| $420,000.00 | 90.50% | $40,000.00 | $336,000.00 | $0.00 |
| $475,000.00 | 80.00% | $95,000.00 | $380,000.00 | $0.00 |
| $550,000.00 | 69.10% | $170,000.00 | $440,000.00 | $60,000.00 |
| $650,000.00 | 58.50% | $270,000.00 | $520,000.00 | $140,000.00 |
Equity and available borrowing are not the same column, and the gap between them is the whole point. At $475,000.00 there is $95,000.00 of equity and nothing available, because 80.00% of that value is exactly the balance already owing.
Before planning anything against your equity, compute 80% of a realistic valuation and subtract your balance. That figure — not your equity — is what a lender is being asked for.
Run it on your own numbers
The same arithmetic, on the figures from your own mortgage. No account, and nothing you type is stored.
Sources
Primary sources, named. Where a figure comes from a statute we cite the section, because the section is what your lender's lawyer will read.
- OSFI Guideline B-20 — loan-to-value limits on residential mortgage lending
- Financial Consumer Agency of Canada — Home equity lines of credit
Written and maintained by the author of the mortgage engine this site runs on, and reviewed against the sources named below. LOONIELODGE does not arrange mortgages, takes no commission from lenders, and nothing here is ranked or recommended because somebody paid for it.
Educational and informational only — not licensed mortgage, financial, legal or tax advice. Every lender's contract governs its own mortgage, and the figures here are estimates from stated assumptions rather than quotes. Confirm anything you intend to act on with your lender and a licensed professional.
Last reviewed August 25, 2026
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