HELOC interest-only payment calculator.

How a HELOC works in Canada

A Home Equity Line of Credit is revolving credit secured against your home — closer to a credit card than a mortgage, but at a far lower rate because your house backs it. Once you are approved for a limit, you draw what you need, repay it, and draw again, as many times as you like. Interest accrues only on the balance you have actually drawn, not on the limit, and the required minimum payment is interest-only. That means the principal never falls on its own; it only drops when you choose to pay more than the interest.

Canadian rules cap a stand-alone HELOC at 65% of your home's appraised value. Bundle it with a mortgage in a readvanceable product and the mortgage plus the HELOC together can reach 80% combined loan-to-value, with the HELOC room growing automatically as you pay the mortgage down. The rate is variable — your lender's Prime rate plus a margin, usually somewhere between Prime + 0.50% and Prime + 1.00% — so it moves the same month the Bank of Canada moves Prime.

What affects your HELOC payment

Three things drive the interest-only minimum, and only two of them are in your control day to day. The first is your drawn balance: borrow more and the payment rises in lock-step, since interest is charged on the balance alone. The second is the rate, which is Prime plus your negotiated margin. You cannot change Prime, but the margin is set once when the line is approved, so it pays to negotiate it down at the start. The third is timing — because the rate is variable, a Bank of Canada hike lands on your statement almost immediately, while a fixed mortgage would not move until renewal.

Your available room also shifts with your home's value and your remaining mortgage. On a readvanceable setup, every principal payment on the mortgage frees up matching HELOC room. The reverse is also true: lenders keep the contractual right to reduce or freeze a HELOC if your equity drops or your credit weakens, so the room is not guaranteed forever.

A worked example

Take a home in Mississauga worth $900,000 with a $400,000 first mortgage still outstanding. To find the HELOC room, start from the 80% combined limit: 80% of $900,000 is $720,000. Subtract the existing mortgage and you are left with $320,000 of available HELOC room ($720,000 − $400,000). That is the most this borrower could be approved for as a readvanceable line behind the mortgage.

Now suppose they actually draw $150,000 to fund a renovation, on a line priced at Prime + 0.50%. With Prime at 5.95%, the HELOC rate is 6.45%. The interest-only minimum is the balance times the rate, divided by twelve: $150,000 × 6.45% ÷ 12 works out to about $806 per month. Draw the full $320,000 instead and the same math gives roughly $1,720 per month. Notice that neither payment touches the principal — at $806 a month, that $150,000 balance will still be $150,000 a year later unless they deliberately pay it down. The calculator above lets you compare that interest-only minimum against an amortizing payment so you can see exactly how much principal the minimum is leaving behind.

How to lower your HELOC cost

The single biggest lever is the margin. A line at Prime + 0.50% rather than Prime + 1.00% saves half a percent on every dollar drawn, for the life of the line — on a $150,000 balance that is about $750 a year. We negotiate that margin down on the readvanceable products we place, because it is set once and then quietly costs you for years.

Beyond the rate, the cheapest HELOC is the one you do not let sit. If the goal is to be debt-free, pay more than the interest-only minimum — treating the balance like an amortizing loan retires it on a schedule instead of renting the money indefinitely. If you are carrying higher-rate debt, consolidating it onto the HELOC and then paying it down aggressively almost always beats leaving it on a credit card. The exception is a deliberate investment-leverage strategy, where the interest can be tax-deductible and keeping the balance outstanding is the point — there, speak to a CPA before you assume the deduction applies.

Related scenarios

If you are weighing a HELOC against a full refinance to pull out equity, our refinance calculator shows the break-even on the new rate versus the penalty to break early. If the equity is going toward paying off credit cards or a car loan, the debt consolidation calculator models the blended payment. And for the full picture on how readvanceable lines, collateral charges, and the Smith Manoeuvre fit together, read our home equity line of credit guide.