A Home Equity Line of Credit (HELOC) can help you tap into your home equity with the same flexibility as a typical line of credit or credit card and the low interest rates of a secured loan in Canada. You can borrow from and make payments to a HELOC at any time, and interest rates on HELOCs are typically much lower than other unsecured alternatives. Check out the latest HELOC rates below.
|Lender||Rate||Minimum Monthly Payment|
When you make mortgage payments, you're increasing the amount of equity that you have in your home. Your home equity will also increase if the value of your home increases, such as through a general increase in prices in Canada's housing market, or through home renovations and improvements.
You can borrow money using your home equity through a home equity line of credit. Since you own the equity in your home, you can use your home equity as collateral to secure a loan. A HELOC is secured by your home, which can allow you to access a large amount of funds at a low HELOC rate. This makes them different from a personal line of credit, which can be unsecured, have a higher interest rate, and allow you to access less funds.
A HELOC gives you a set credit limit that is based on your appraised home value, which will require a home appraisal. Your HELOC limit can also be determined by your existing debt and credit history. You’re able to borrow funds from your HELOC or repay your HELOC at any time. With most HELOC lenders, you can access your HELOC funds at any time through online banking, at a branch, an ATM, or by using a cheque. Some HELOC lenders can also let you use your HELOC through a debit card or Visa access card.
You will only pay interest on the amount that you borrow. This will be through an interest-only minimum payment for your HELOC. However, your HELOC won't be interest-only forever. After a certain period of time has passed, known as your HELOC's draw period in your agreement, you'll have to start repaying the money that you have borrowed.
Most major banks will only allow you to borrow up to 80% of the value of your home, including your existing mortgage and your potential HELOC. On its own, a HELOC can't be for more than 65% of the value of your home in Canada.
For example, if your home value is $500,000 and you currently have a mortgage of $300,000, your total borrowing limit is 80% of $500,000, which is $400,000. Since you're already borrowing $300,000 through a mortgage, you can access an additional $100,000 with a HELOC.
If your home value is $500,000 and you do not have a mortgage, you can borrow up to 65% of your home’s value, which will give you a HELOC credit limit of $325,000.
You can easily calculate how much you can borrow using the HELOC credit limit calculator above or by using our HELOC calculator.
Both mortgage refinancing and a home equity line of credit (HELOC) gives you access to your equity, but there are differences in when you can borrow, how much you can borrow, and costs associated with borrowing.
After deducting the current balance of your mortgage and other loans secured by your home, a mortgage refinance allows you to borrow up to 80% of the value of your home. Refinancing gives you a one-time lump-sum cash amount that you can then use for purposes such as debt consolidation or for investing. Interest will immediately start to accrue on this full borrowed amount.
A HELOC allows you to borrow up to 65% of the value of your home on its own. If it is a standalone HELOC, your credit limit will not increase even as you make payments towards the mortgage principal if you’re already at this 65% limit. You will also only pay interest on the amount that you use.
A HELOC would be suitable if you’re looking for a flexible borrowing option that lets you access funds and repay at any time, with a low required monthly payment. If you're looking to borrow a larger amount of money, and want to lock-in a fixed interest rate, then a mortgage refinance might be better.
|HELOC||Mortgage Refinance||Home Equity Loan||Reverse Mortgage|
|Only pay for what you borrow||Yes||No||No||No|
|Maxmium value of your home that you can borrow||65%||80%||80%||55%|
|Access to credit||Anytime||One-time||One-time||Flexible|
|Required Payments||Interest only||Interest and principal||Interest and principal||None|
Besides a HELOC on its own, there are alternatives to HELOCs that let you borrow money based on your property's value. This includes home equity loans, reverse mortgages, and readvanceable mortgages.
A HELOC is often bundled with a mortgage, which allows for your credit limit to increase as the mortgage principal is paid down. This is known as a readvanceable mortgage or collateral mortgages. Most major banks offer readvanceable mortgages. Some lenders will automatically readvance your payments, which means that you can automatically re-borrow your mortgage payments, but some lenders require you to request a readvance by contacting them.
HELOCs in a readvanceable mortgage are used for the Smith Maneuver, a strategy that allows you to make your Canadian mortgage interest tax-deductible.
With a home equity loan, you are getting an additional loan on top of your existing mortgage. A Home equity loan is different from a mortgage refinance, since a refinance means that you are borrowing more or changing terms on your original mortgage. Adding a loan on top of your mortgage through a home equity loan is also different from a HELOC, which is a revolving and open loan. A home equity loan is usually closed and has a fixed interest rate.
If you're over the age of 55, a reverse mortgage lets you borrow your home equity with zero interest payments required. Instead, interest is taken out of your home equity. Reverse mortgages offer flexible borrowing options, such as receiving money at regular intervals or as a lump-sum.
|Lender||Readvancing of Available Credit||Debit Card Access||Minimum HELOC Credit Limit|
The RBC Homeline Plan® is an all-in-one lending solution that combines a traditional mortgage with a HELOC (RBC Royal Credit Line®). One of its advantages is that you can lock-in a rate for your HELOC to protect yourself from interest rate fluctuations. You can also divide your mortgage into fixed-rate and variable-rate portions. For terms and eligibility, talk to your local RBC branch advisor.
The BMO Homeowner ReadiLine® is BMO's combination mortgage and HELOC product. If you have 20% down-payment or equity in your home, you can borrow up to 80% of your home's value between a mortgage and line of credit. One of the features of Homeowner ReadiLine® is that your HELOC's credit limit increases as you make mortgage payments, allowing you to quickly tap into your extra home equity. For terms and eligibility, talk to your local BMO branch advisor.
The TD Home Equity FlexLine is a HELOC that has two portions: a revolving portion (HELOC) and a term portion (mortgage). The revolving portion of TD's HELOC acts like a regular HELOC that has a variable HELOC interest rate based on TD's Prime Rate. The revolving portion is open, which means that you can make repayments of any amount at any time. The revolving portion is also readvanceable, which means that your HELOC payments will increase your available credit again. You can only borrow up to 65% of your home’s value with the revolving portion.
The term portion of TD's Home Equity FlexLine acts like a mortgage, and allows you to borrow up to 80% of your home’s value. You can't make interest only payments, as the term portion requires regular payments. You can choose between a fixed or variable interest rate and having it be open or closed. Your revolving portion (HELOC) can be converted to a term portion, which allows you to lock in a fixed interest rate.
With an open term portion, you can repay any amount without mortgage prepayment penalties. With a closed term portion, you can only make prepayments of up to 15% every year, or increase your regular term payments by 100%.
TD HELOC rates for the revolving portion is variable based on TD's Prime Rate. The term portion can be closed with a fixed rate for a term of up to 5 years, while a fixed open term can have a 1-year term.
Scotiabank’s Scotia Total Equity Plan (STEP) combines more than just your mortgage with a line of credit. STEP allows you to also link your Scotiabank credit cards, personal loans, and other products to your STEP account. The maximum borrowing limit of Scotiabank's STEP is 80% of the value of your home, and 65% for individual lines of credit.
Scotiabank's STEP has two lines of credit options: the ScotiaLine Personal Line of Credit and the ScotiaLine Personal Line of Credit with Access Card. The ScotiaLine Personal Line of Credit is a secured line of credit that uses the value of your home, unlike unsecured personal lines of credit. If you choose the ScotiaLine without card access, the maximum limit is $1,500,000, or up to 65% of the value of your home.
|Product||Debit Card Access||Borrowing Amount|
|ScotiaLine Personal Line of Credit||✗||$100,000 - $1,500,000|
|ScotiaLine Personal Line of Credit with Access Card||✓||$10,000 - $500,000|
If you choose to get a Visa access card, which allows you to make in-store and online purchases directly from your line of credit account, the maximum credit limit is $500,000. In comparison, the unsecured ScotiaLine Personal Line of Credit not under the STEP program or tied to your home has a credit limit of up to $75,000.
Scotiabank's STEP has automatic limit increases, which means that your personal line of credit or STEP credit card will have their credit limit increase as you make mortgage payments, up to a credit limit of 65% of your home's value. The ScotiaLine Personal Line of Credit linked with STEP has a variable HELOC interest rate based on the Scotiabank Prime Rate. It also only requires interest-only minimum payments. This minimum payment can be as low as $50 per month, or your outstanding balance if it is less than $50.
The CIBC Home Power Plan combines a mortgage with a home equity line of credit. With the CIBC Home Power Plan Line of Credit, you can make interest-only payments with a variable interest rate based on the CIBC Prime Rate.
The CIBC Home Power Plan offers automatic rebalancing, which increases your HELOC available credit as you make mortgage payments. However, CIBC's automatic rebalancing can take up to 60 days for your credit limit to increase. CIBC charges a $300 property valuation fee for a home appraisal.
National Bank offers a HELOC only or a HELOC combined with a mortgage loan. Similar to other HELOC lenders, you can borrow up to 65% of your home's value with a HELOC only, and up to 80% with a combined HELOC and mortgage loan.
National Bank's HELOC portion will have a variable HELOC rate based on National Bank's Prime Rate. National Bank also offers a debit card that allows you to access your funds conveniently. If you have a combined HELOC and mortgage loan, your HELOC portion will automatically increase it's credit limit when you make mortgage payments that pay down your principal.
The mortgage loan portion of the All-In-One can have either a fixed mortgage rate, variable mortgage rate, or both. National Bank charges a fee of $7 per month.
The Tangerine Home Equity Line of Credit’s main selling point is its low HELOC rate, based on the Tangerine Prime Rate. Tangerine offers a fixed payback plan, which makes it easy for borrowers to repay their HELOC instead of making just interest-only minimum payments.
Tangerine's HELOC does not have automatic rebalancing or credit limit increases when you make mortgage payments. You also won't be able to get a Tangerine HELOC if you already have a mortgage with a different lender, and you won’t be able to get a debit card to access your HELOC funds.
The main rule that HELOC lenders have is that you need to have at least 20% equity or down payment in order to qualify for a mortgage and HELOC. If you're getting only a HELOC, you would need at least 35% equity or down payment.
You will still need to pass the mortgage stress test even if you're getting just a stand-alone HELOC at a major bank. Private lenders do not have to conduct the stress test, but their home equity loan rates can be significantly higher.
Your home's value will be assessed through a home appraisal. This can cost $300 or more, and will be paid by the borrower. Besides your home's value, your lender will also look at your credit score, income, and debt service levels.
Some lenders offer mortgage protection insurance or credit insurance for your HELOC, however, this insurance is completely optional. A HELOC lender cannot force you to purchase credit insurance in order to be approved for a HELOC.
HELOCs also aren't guaranteed to remain open by your lender. Your HELOC lender can ask you to immediately repay the HELOC in full, such as if you miss your HELOC payments or if your home's value decreases significantly.