HELOC is flexible but pricier. Refinance is cheaper but rigid. The real cost gap shows up in year 3 — not at closing. The mistake most Canadians make: Picking based on the closing-day rate. HELOCs are prime+ floating; refinances are fixed-term. The true cost depends on how long you hold the balance and how rates move. What changed in 2026 (and why it matters now) HELOC max LTV: 65% (standalone) / 80% combined with the first mortgage. Refinance max LTV: 80%. Both trigger full re-qualification under OSFI B-20. HELOC rates are tied to prime; refinance rates lock at the contract rate for the term. Both HELOCs and refinancing let you access your home equity—but they work very differently. Choosing the right option can save you thousands of dollars and provide the flexibility you need. Here's everything you need to know to make the right choice. How Each Option Works HELOC (Home Equity Line of Credit) Structure: Revolving credit line secured against your home Maximum usually 65% of home value (combined with mortgage, up to 80%) Draw funds as needed, pay back, draw again Interest-only payments on outstanding balance Rate: Variable rate (typically prime + 0.50% to prime + 2.00%) Current range: 5.45% - 6.95% Refinance Structure: Replace existing mortgage with new, larger mortgage Maximum 80% of home value Receive lump sum difference as cash Principal + interest payments Rate: Fixed or variable available Typically lower than HELOC (current 4-5%) Head-to-Head Comparison HELOC Refinance Access type Revolving Lump sum Rate Variable only Fixed or variable Payment Interest only P+I Flexibility High Lower Setup cost Lower ($500-$1,000) Higher ($2,000-$5,000+) Ongoing cost Potentially higher Lower rate Speed 2-3 weeks 4-6 weeks Penalty on exit None May apply Explore Your Options Talk to our team about whether a HELOC or refinance makes more sense for your specific situation. When to Choose a HELOC A HELOC is often better when: 1. You Have Ongoing or Uncertain Expenses Home renovations in phases Business needs with variable timing Emergency access (use as needed) 2. You Want Flexibility Only pay interest on what you use Repay and redraw as needed No penalty to pay down or close 3. You Want to Avoid Breaking Your Mortgage Keep existing mortgage intact Avoid penalties on current mortgage Add HELOC as secondary credit 4. Short-Term Needs Expecting to pay off quickly Bridge financing situations Funds needed for short period When to Choose Refinancing Refinancing is often better when: 1. You Have a Known, One-Time Need Debt consolidation Major renovation (known budget) Investment opportunity 2. You Want Lower Rates Refinance rates typically lower than HELOC Lock in fixed rate for stability Long-term savings 3. You Want to Restructure Change rate type (variable to fixed) Adjust amortization Access better mortgage features 4. Your Current Mortgage Rate Is High May make sense even with penalty Calculate break-even point Combine equity access with rate improvement Cost Comparison Example Scenario: $100,000 needed from home equity HELOC Costs Amount Setup costs $500-$1,000 Monthly interest (at 6.5%) $542 Annual interest $6,500 Refinance Costs Amount Penalty (estimated) $5,000 Legal fees $1,500 Appraisal $0-$400 Monthly P+I (at 4.5%, 25yr) $555 Annual interest ~$4,400 Analysis: Higher upfront cost for refinance, but $2,100/year less in interest. Break-even in ~3 years. The Readvanceable Mortgage: Best of Both Some products combine mortgage and HELOC: How it works: Mortgage portion amortizes normally As principal is paid down, HELOC limit increases Total credit remains at 80% of home value Access equity without refinancing Example: Home value: $700,000 Maximum credit (80%): $560,000 Mortgage: $400,000 Available HELOC: $160,000 As mortgage pays down, HELOC room increases What's Next The best choice depends on your specific situation—how much you need, for how long, and what your existing mortgage looks like. Talk to our team for personalized advice on the most cost-effective way to access your equity. Find out how much equity you can actually access Free, no-commitment equity analysis. We show you HELOC, refinance, and second-mortgage options side by side. Get My Equity Options Ready to Get Started? Contact us today for personalized mortgage advice and competitive rates. Get Pre-Approved Call (416) 822-7357 Frequently Asked Questions Is HELOC interest tax-deductible? Only if the borrowed funds are used to earn investment income. See the Smith Manoeuvre for the structured strategy. Can I have a HELOC AND refinance? Yes — a readvanceable mortgage combines both products on one title. What credit score do I need? Most A-lenders want 680+ for HELOC. Refinance is similar. Alternative lenders go lower with higher rates.
