Home equity starts with value and secured debt
Home equity is the home’s value less debt secured against it. The Financial Consumer Agency of Canada explains this relationship in its home equity guidance. A credit limit is different from an amount currently owed.
For a planning conversation, start with a supported value range and current balances. If the homeowner has a mortgage and a HELOC, count the amount drawn on the HELOC, not its unused limit. Avoid counting the same balance twice where a lender combines products on one statement.
Estimated sale proceeds add another deduction
A sale creates costs that an equity calculation does not include. The FCAC’s selling-a-home guide describes costs such as legal fees and possible mortgage prepayment charges. Ask the relevant provider for current figures.
In a simple scenario, estimated proceeds equal entered sale value minus entered secured debt minus entered selling costs. Put every included cost in once, including any applicable taxes on those fees. There is no standard commission rate assumed here.
TWO SEPARATE QUESTIONS
Equity: what is the difference between value and secured debt? Sale proceeds: what remains after the entered sale costs as well?
A fictional worked example
| Item | Low value | High value |
|---|---|---|
| Entered home value | $850,000 | $900,000 |
| Mortgage + drawn HELOC | $435,000 | $435,000 |
| Estimated equity | $415,000 | $465,000 |
| Entered selling costs | $34,500 | $34,500 |
| Estimated sale proceeds | $380,500 | $430,500 |
The $34,500 is an illustrative amount, not a recommendation or quote. Try changing the inputs in the free equity versus sale proceeds explorer. The result changes only because the figures you enter change; the tool does not estimate market value.
Explain what the number leaves out
This simple proceeds scenario excludes income or capital gains tax, moving costs and costs of the next purchase. It also cannot account for an unknown mortgage penalty or closing adjustment unless you include an estimate in the cost input. It is not a lender payout statement or a legal statement of adjustments.
Before someone relies on it for a move, confirm balances and costs with the lender, lawyer or notary and accountant as appropriate. Keep the assumption date visible. A useful review shows the uncertainty rather than hiding it behind a precise-looking total.