Borrow up to 65% of your home value at prime-plus rates — flexible, interest-only, revolving credit.
A home equity line of credit is revolving credit secured against your home. You are approved for a limit, you draw what you need, you pay interest only on the drawn balance, and you can repay and re-borrow without reapplying.
Two structures exist in Canada and they are not the same product:
HELOCs are priced as prime plus a spread, so they are variable by design and move the day prime moves. Typical 2026 spreads:
Watch for the annual fee (commonly $0–$75), the setup cost (appraisal plus legal, or free on lender-paid switch promotions), and whether the lender permits a fixed-rate sub-account so you can lock part of the balance.
Rule of thumb: a known lump sum with a long payback favours a refinance; unknown timing or repeated draws favour a HELOC; a bruised file or a punishing IRD penalty favours a second mortgage.
HELOCs are stress tested like any other federally regulated credit. Lenders qualify you on the full limit at the greater of 5.25% or the HELOC rate plus 2%, amortized as if it were a 25-year mortgage — not on your interest-only minimum payment. That is why a large HELOC limit shrinks your future mortgage capacity.
Where a HELOC earns its keep: renovation funding released in stages, bridging a purchase before a sale closes, consolidating 19.99% card debt into prime-plus money, self-employed cash-flow smoothing, and investment strategies like the Smith Manoeuvre or cash damming.
Tax deductibility: HELOC interest is deductible only when the borrowed funds are used to earn business or investment income, and only if you can trace the money cleanly. Mixing personal and investment draws in one account destroys the audit trail — use a separate sub-account and talk to an accountant before you start. See the Smith Manoeuvre guide.
The risks that matter:
The strategic move is to set a HELOC up while your income and equity are strong — before you need it — and leave it undrawn.
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Up to sixty-five per cent of your home's appraised value on a standalone HELOC, or up to eighty per cent combined loan-to-value when the HELOC is bundled with your mortgage in a readvanceable product. The revolving portion can never exceed sixty-five per cent.
Most HELOCs price at prime plus zero point five to prime plus one per cent for strong borrowers. Rentals and bruised credit price higher. Because it is tied to prime, your rate changes whenever the Bank of Canada moves.
The minimum payment is interest only, so the balance does not decrease unless you pay more. You can pay principal at any time with no penalty and re-borrow it later, which is the main advantage over a mortgage.
Only when the borrowed money is used to earn business or investment income, and only if the use can be traced. Keep investment draws in a separate sub-account, never mix them with personal spending, and confirm the structure with an accountant.
A refinance gives a lower rate and forced amortization, which wins when you need a known lump sum and will not re-borrow. A HELOC wins on flexibility and does not break your existing mortgage, so it avoids an IRD penalty mid-term.
Yes. A HELOC is a demand facility, so the lender can freeze, reduce or call the limit, typically if property values drop sharply or your credit deteriorates. That is why it is smart to arrange one while your position is strong rather than during a crunch.
It can. Lenders count roughly three per cent of the approved limit as a monthly obligation in your debt ratios whether or not you have drawn on it, which reduces the mortgage you qualify for.
Yes. A-lenders will use two years of Line 150 income, and alternative-income programs use business bank deposits or a reasonability test where declared income is low. Strong equity makes approval considerably easier.
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