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HELOC

Home Equity Line of Credit

A revolving line of credit secured against your home, typically up to 65% LTV stand-alone or 80% combined with a mortgage. Variable rate (prime + spread), interest-only minimums, redraw any time.

A HELOC behaves like a giant, low-rate credit card secured by your home. You're approved for a limit, you only pay interest on what you actually draw, and you can repay and redraw as often as you like with no penalty.

At federally regulated lenders, the revolving HELOC portion is capped at 65% of your home's value (OSFI B-20). Combined with an amortizing mortgage (a re-advanceable mortgage), total borrowing can reach 80%, and the HELOC room can grow as you pay down the mortgage portion.

The catch is the rate is variable (prime plus a spread) and the minimum payment is interest-only, which makes it easy to carry a balance indefinitely. Used with discipline — for renovations, a bridge, or investment leverage — it's one of the cheapest forms of flexible credit in Canada.

Sources

  1. Borrowing against home equity (Financial Consumer Agency of Canada)
  2. Guideline B-20: Residential Mortgage Underwriting Practices and Procedures (OSFI)
Related on Mortgage Squad Advisors

See also

EquitySecond mortgageRefinance

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A lender

A bank or monoline that prices its lowest rates and tightest underwriting against borrowers who fit prime credit, income, and property criteria. The big banks (RBC, TD, Scotia, BMO, CIBC, NB) and major monolines (MCAP, First National, MERIX) are A lenders.

B lender

An alternative ("alt-A") lender that prices higher than A lenders but flexes on credit history, income documentation, property condition, or self-employed earnings. Examples include the alternative-lending programs of Equitable Bank and Home Trust.

Bridge financing

Short-term loan that lets you close on a new home before the sale of your existing one funds. Priced at prime + premium, secured against both properties, typically up to 90-120 days.

Closed mortgage

A mortgage that limits how much extra you can prepay each year and charges a penalty if you break the term early. Almost all standard Canadian mortgages are closed because the rates are materially lower than open.

Collateral charge mortgage

A mortgage registered against your property for more than the actual loan amount, letting you increase the limit later without re-registering. Common at TD and Scotia. Makes inter-lender switches harder mid-term.

Conventional mortgage

A mortgage with at least 20% down. No mortgage default insurance required. Pricing is typically higher than insured because the lender carries more of the credit risk.

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