Most HELOCs only require interest. Here is exactly what that costs each month, what it takes to actually pay the line off, and how much you can borrow.
See your interest-only minimum payment, what it costs to pay the line off on a schedule, how much you can borrow, and what happens if prime goes up. All figures in Canadian dollars.
Prime defaults to 4.45% (Bank of Canada policy rate 2.25% + 2.20%). Change it if your lender's prime differs.
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Your HELOC rate
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Interest-only minimum payment (average month)
$0
Payment to clear it on schedule
Total interest on that schedule
If prime rises 1%
Maximum HELOC limit
Estimates only. Interest is calculated daily (balance × rate ÷ 365) and charged monthly. Limits follow the 65% / 80% loan-to-value rules; lenders may approve less.
A HELOC rate is prime plus a margin, so it moves every time the Bank of Canada changes its policy rate. Interest is worked out daily and charged once a month:
Example: $100,000 drawn at prime 4.45% + 0.50% = 4.95%. Daily interest is about $13.56, so the minimum is about $407 in a 30-day month and $420 in a 31-day month. Paying it off over 10 years takes about $1,058 a month.
Federally regulated lenders cap the revolving HELOC portion at 65% of your home value, and your HELOC plus mortgage together at 80%. Your limit is the lower of the two.
Lenders also check that your income can carry the line, so approval can be lower than these maximums.
Paying only the minimum never reduces the balance. Ten years of interest-only on $100,000 at 4.95% costs about $49,500 and you still owe the full $100,000. If you are using a HELOC for something you cannot repay quickly, compare it with a fixed-term home equity loan or a refinance, which force the balance down.
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At 4.95% (prime 4.45% plus 0.50%), the interest-only minimum is about $412 in an average month. To pay it off over 10 years, the payment is about $1,058 a month.
Daily. Lenders take your balance times the rate divided by 365 each day and charge the total once a month, so 31-day months cost a little more than 30-day months.
Usually not. Most Canadian HELOCs only require interest each month. You can pay down principal any time without a penalty.
Every 1% increase in prime adds about $83 a month in interest for each $100,000 you owe.
Up to 65% of your home value on the line itself, and no more than 80% of your home value once your mortgage balance is added in. Income and credit also limit the approval.
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