Home equity loan in Canada is a broad term that describes different types of loans in which the borrower uses the equity of their home as collateral. It’s a type of consumer debt that allows homeowners to borrow against their home’s equity.

It’s accessed by most for reasons of personal emergencies that require a good sum of money. 

How to Spend a Home Equity Loan

Using the equity of your home for a loan requires some good decision-making on where to spend the proceeds. To use it wisely and responsibly, we recommend these 4 ways to use your home’s equity.

  • Paying off educational expenses. University schooling can be very expensive for most. Bachelor and higher degrees require a big amount of money to pursue and complete. 

When the time comes that you run out of gas to pay your tuition or your child’s school expenses, you can opt to access your home’s equity and apply for a loan. It’s a reason highly esteemed for approval by banks and other financial institutions. 

This type of home loan can help you settle the academic fees required for the semester or the entire year. However, you can first look at student loans as an option (including the terms and interest rates) before tapping into your home’s equity.

  • For Emergency Fund. Unexpected emergencies can take a toll on your finances. Unfortunate circumstances like accidents or hospitalization where you’ll need large amounts of money, your home equity can be a good source of financial help. 

Financial experts strongly suggest that people should have an emergency fund to cover at least three to six months of living expenses. 

When you require a large amount of money, you can make a loan against your home for emergency purposes. And this is a very valid reason.

  • Home Improvements. Because your home is a big investment, it’s just rightful that you take care of it as it’s prone to ‘wear-and-tear.’ However, home repairs, improvements, and renovations can cost a lot.

This is a good reason for you to use your home equity. Loans used for improvement and renovation of your home can increase your home’s market value.

  • Paying off High Interest-Rate Credit Cards and Debts. You might be paying several loans or credit card bills that are incurring high-interest rates. It’s a common dilemma for many.

But how can you be helped in paying those commitments? Accessing your home’s equity is a good option to pay your credit cards and debts.

By transferring high-interest credit card bills to a home equity loan with a rate that’s less than a third of what you’re paying on your credit cards, it’s not difficult to imagine how much faster you could be paying down your debts.

How NOT to Use Your Home’s Equity

Tapping into your home’s equity for unnecessary lavish expenses can be one of the worst reasons. By this, we mean spending it on an extravagant vacation, a new boat or an over-the-top luxury vehicle. 

Yes, it can be tempting to spend your hard-earned money on something other than house payments. But isn’t it much wiser to devise an alternate plan to cover these fun but unnecessary expenses, instead of borrowing from your home’s equity? 


A home equity loan can be a good way to access cash quickly for important expenses or emergencies. It’s important to proceed with caution and has significant and sufficient reasons for doing so. 

Bear in mind that if you fail to repay your home equity loan, you could lose your home to foreclosure.

Home equity has this rule: Don’t borrow more than you need, don’t overspend and don’t put your house at risk of foreclosure for an insignificant purchase.

Eventually, it’s well-advised to speak with a financial advisor when in doubt.

How to Spend a Home Equity Loan? Mortgage broker in Greater Toronto Area

Daisy Raouph, CLU, CHS, specializes in mortgage financing solutions and financial services. A Mortgage Broker and Financial Security Advisor with over 30 years of experience in financial services. Contact us today to review your mortgage financing options. We can help!