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HELOC

HELOC in Canada: How a Home Equity Line of Credit Works

A HELOC in Canada is a revolving line of credit secured by your home. You can borrow up to 65% of its value on a stand-alone line, or up to 80% combined with your mortgage, and you pay interest only on what you draw. Here is how it works, what it costs, and when it’s the wrong tool.

Up to 65% stand-aloneUp to 80% combinedPrime plus a marginInterest-only minimumsRepay and re-borrowStress-tested on the full limit
FSRA #13737| 5-min pre-qualification

Written by the Mortgage Squad Advisors Editorial Team · Reviewed by Surrayya Afzal, Principal Broker, FSRA #13737 · Updated September 2026

Tap your home equity
Borrow up to 80% of your home's value.
A flexible line of credit secured by your home. Pay interest only on what you use. Pay it back any time, no penalty.
Available HELOC$185,000
Drawn$0
Min payment
$0/mo
Rate (P+0.50%)
6.45%
Get pre-approved HELOC math
Maya · AI · 24/7
HELOC vs refinance — which one wins for me?
FSRA #13737| 50+ languages

Many Canadian homeowners carry expensive unsecured debt or plan renovations in stages while sitting on home equity they could borrow against more cheaply. A HELOC is one of the most flexible ways to borrow in Canada, and that flexibility makes it easy to misuse. Interest-only minimums let a balance sit for years, the rate moves with prime, and the lender can shrink the line when you need it most. Know how it works before you sign.

The short answer

A HELOC in Canada is revolving credit secured against your home. A stand-alone line is capped at 65% of your home’s value. Combined with a mortgage, the total can reach 80%, with the portion above 65% in amortizing mortgage debt. The rate is variable (prime plus a margin), and the minimum payment is usually interest only. Lenders qualify you on the full limit at the stress-test rate, and they can reduce or freeze the line if your equity or credit weakens.

What is a HELOC?

A HELOC, or home equity line of credit, is a revolving loan secured by your home. You’re approved for a limit, draw what you need, and pay interest only on the balance you’ve drawn. You can repay and re-borrow without reapplying. In Canada, a stand-alone HELOC can reach 65% of your home’s value.

What you get

Why Canadians choose Mortgage Squad Advisors.

Stand-alone limit up to 65% of your home’s appraised value, or up to 80% combined with a mortgage
Interest only on the balance you draw, so an unused line costs nothing in interest
Prime-based variable pricing, with the margin compared across 100+ lenders
Stand-alone line or readvanceable mortgage, chosen by how you’ll actually use the money
Qualification modelled on the full limit up front, so the line doesn’t block your next approval
Appraisal, legal and registration costs disclosed in writing before you commit
A straight answer when a refinance, second mortgage or unsecured line fits better
Instant check · no credit pull

How much equity can you tap?

HELOCs go up to 65% LTV revolving (80% combined with your mortgage).

$240,000
Accessible equity (estimate)
$240,000
HELOC room (to 65% LTV)
HELOC ≈ prime + 0.5%
Typical cost
Estimates only — a licensed advisor confirms your file. FSRA #13737.

Or ask Maya directly:

Do I qualify for a home equity line of credit?What documents will I need?How fast can this close?
Maya · 24/7 AI advisor

Question about home equity line of credit? Maya answers instantly in 50+ languages.

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How it works

Three simple steps, no pressure.

1

Measure your equity

We confirm your mortgage balance and current home value, then work out both ceilings: 65% of value minus your mortgage for a stand-alone line, and 80% of value minus your mortgage for a combined structure.

2

Match the structure and lender

We compare stand-alone lines and readvanceable mortgages across 100+ lenders. We look at the margin over prime, setup costs, how the charge is registered, and whether part of a balance can be locked at a fixed rate.

3

Qualify, register and draw

The lender verifies your income and credit, stress-tests the full limit and usually orders an appraisal. Once the charge is registered, you can draw by transfer or cheque, repay any time and re-borrow as needed.

Run the math first

HELOC vs refinance vs second mortgage

All three turn home equity into cash, but the money behaves differently. See the detailed comparisons in HELOC vs refinance and HELOC vs second mortgage.

How a HELOC compares with a refinance and a second mortgage in Canada
FeatureHELOCRefinanceSecond mortgage
How you get the moneyDraw as needed up to your limit, then repay and re-drawOne lump sum when the new mortgage fundsOne lump sum on a set term
RateVariable: prime plus a marginMortgage rate, fixed or variableUsually higher, often fixed for the term
Maximum borrowing65% of value on the line; 80% combined with a mortgageUp to 80% of valueUp to 80% combined with the first mortgage at a regulated lender
Effect on your first mortgageNone; your existing rate is untouchedReplaces it; a break penalty may apply mid-termNone; it sits behind the first mortgage
QualifyingIncome, credit and a stress test on the full limitFull requalification, including the stress testMainly equity-based, so easier to qualify
SuitsStaged, recurring or uncertain needsA known lump sum at a mortgage rateA fast lump sum when a HELOC won’t approve

Limits reflect regulated-lender rules; private lenders set their own terms. Confirm current rules with your broker.

How a HELOC works in Canada

A HELOC is registered as a charge against your home, like a mortgage. Instead of a lump sum, you get a credit limit. You draw what you need by transfer or cheque, pay interest on the drawn balance, and any principal you repay becomes available to borrow again. With a zero balance, you owe nothing.

The limit is set by two ceilings. A stand-alone line can reach 65% of your home’s appraised value, minus your mortgage. A HELOC combined with a mortgage can bring total borrowing to 80% of value, but the portion above 65% has to sit in amortizing mortgage debt, not in the revolving line. As an illustration, on an $800,000 home with a $400,000 mortgage, 65% of value is $520,000, leaving up to $120,000 of stand-alone room. The 80% ceiling is $640,000, the most that a combined structure can total. How much of that can revolve depends on the lender’s structure and the 65% limit on the line, so confirm current rules with your broker. Both ceilings are based on today’s appraisal, not your purchase price.

Stand-alone HELOC or readvanceable mortgage

A stand-alone HELOC is a separate line that sits alongside your mortgage without changing it. A readvanceable mortgage bundles a mortgage and a HELOC under one collateral charge. As you pay down mortgage principal, the available line grows by the same amount.

The readvanceable structure suits people who will draw and repay repeatedly over years. The trade-off is the registration: a collateral charge generally can’t be transferred to a new lender, so moving at mortgage renewal usually means registering a new charge, with legal costs a standard switch incentive may not cover. For a single draw with a mortgage you may want to move later, a stand-alone line is usually simpler.

What a HELOC costs and how you qualify

HELOCs are priced at the lender’s prime rate plus a margin. When the Bank of Canada moves and prime changes, your rate changes too. There’s no fixed term. The margin is negotiable, and that’s the part worth comparing across lenders; see today’s market on our rates page rather than relying on a number quoted without your file. Setting up a stand-alone line usually involves an appraisal, legal and registration work, and sometimes title insurance.

Qualifying is the step most borrowers underestimate. Lenders stress-test the full authorized limit, not what you plan to draw, at the greater of your contract rate plus 2% or 5.25%. That qualifying payment counts in your GDS and TDS ratios even if the line sits at zero. A large line opened just in case can reduce what you can borrow for your next property or vehicle. Lenders also look for good credit, verifiable income and a mortgage in good standing.

The risks: interest-only drift, rising prime and a line that can shrink

Paying only the interest keeps payments low, but the principal never falls. Pay the minimum for years and you still owe what you borrowed. Treat the minimum as a floor, set your own repayment date, and model a real payment with our HELOC payment calculator.

The risk people overlook is that lenders keep the right to reduce or freeze a HELOC if your equity falls or your credit weakens, and that can happen when markets or household finances are under strain. That’s why a HELOC shouldn’t be your only emergency fund; keep cash savings alongside it. Interest is generally deductible only when borrowed money is used to earn income, such as an investment or rental. Confirm your plan with an accountant before relying on a deduction.

Debt consolidation, and when a HELOC is the wrong tool

A HELOC can pay down high-interest balances, but it works only with a repayment plan. Otherwise the cards fill up again while the line stays drawn. If you’d rather replace scattered debt with one amortizing payment, compare our guide to a debt consolidation mortgage.

A HELOC is usually the wrong choice when the amount is small enough that setup costs outweigh the rate advantage over an unsecured line; when you need payment certainty for years, where a fixed refinance or second mortgage fits better; when it would be your only emergency cushion; or when the money would fund something that earns less than the interest costs.

FAQ

Common questions, answered.

Don’t see yours? Ask Maya — instant answer, any time.

How much can I borrow with a HELOC in Canada?
A stand-alone HELOC is capped at 65% of your home’s appraised value, minus your mortgage balance. Combined with a mortgage, total borrowing can reach 80% of value, but the portion above 65% must be amortizing mortgage debt. Your income, credit and the stress test can reduce the limit below those ceilings.
Do I have to pass the stress test for a HELOC?
Yes. Lenders qualify you on the full limit at the greater of your contract rate plus 2% or 5.25%, even if you plan to draw nothing. That qualifying payment counts in your debt-service ratios, so size the line to what you’ll use.
Can a lender reduce or freeze my HELOC?
Yes. HELOC agreements typically let the lender reduce or freeze the limit if your home’s equity falls materially or your credit deteriorates, even without a missed payment.
Should I get a HELOC or refinance?
A HELOC suits flexible or staged needs and protects a low existing mortgage rate. A refinance suits a known lump sum you want repaid on a schedule, and it’s cleanest at renewal when no break penalty applies. We model both on your numbers before you decide.

Related products

Guide to working with a mortgage brokerDebt consolidation mortgageMortgage renewalHELOC vs refinanceHELOC vs second mortgageHELOC payment calculatorPrime rateFind a local mortgage broker

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