An equity mortgage is a mortgage where the lender’s decision rests mainly on your home equity: how much your home is worth compared with what you owe on it. Income and credit still matter, but they don’t carry the whole decision the way they do at a bank. For Albertans with plenty of equity and an unusual income or credit picture, that difference can open the door.

How it differs from a regular mortgage

A traditional bank mortgage is built around your ability to repay on paper: your documented income, your debt ratios and your credit score. If any of those falls short of the bank’s formula, the answer is often no, regardless of how much your home is worth.

An equity lender starts from the other end. It asks:

  • How much equity is there after all existing mortgages?
  • How easily could the property be sold if needed?
  • Is there a sensible plan to make the payments and eventually repay?

If those answers are strong, the lender can be flexible about the rest. See equity lending vs traditional mortgages for a side-by-side.

Who offers equity mortgages

Equity-based lending comes from alternative lenders (often trust companies), some credit unions, and private lenders. Each has different rules and costs. Our guide to who offers equity mortgages in Alberta explains the differences.

What it costs

Because the lender is taking on a situation a bank wouldn’t, equity mortgages usually carry a higher rate and often a lender fee. The more equity you keep after borrowing, the better the terms tend to be. See equity mortgage rates and fees.

When it makes sense

An equity mortgage can be a good fit if you have significant equity, a clear purpose for the money, and a realistic plan for the payments, but a bank won’t approve you right now. It’s usually not a good fit if a bank would approve you, or if borrowing would leave you with very little equity as a cushion. Read about the risks of borrowing against your home before you decide, and see the equity mortgage FAQ for quick answers.

Next step

A licensed mortgage broker can estimate your usable equity and tell you whether a bank, an equity lender or another option is the best fit.

This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.