Glossary
Home Equity Line of Credit (HELOC)
Home Equity Line of Credit (HELOC) — A revolving credit line secured by your home, usually capped at 65% loan-to-value and typically priced off the lender's prime rate..
A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home, usually capped at 65% loan-to-value for the revolving portion. It is not a mortgage with a fixed amortization; instead you draw funds as needed, repay them, and draw again up to an approved limit, with interest typically charged at a variable rate tied to prime rate.
How a HELOC is set up in Canada
Most lenders register a HELOC as a collateral mortgage against the property title, which lets the lender set and adjust the credit limit without discharging and re-registering the charge. The size of the line is based on the home's appraised value and the loan-to-value ratio. Under federal rules for federally regulated lenders, the revolving portion is typically limited to 65% of the home's value, and total secured borrowing across the mortgage and the line is generally capped at 80%. Confirm current limits with your lender or with OSFI's Guideline B-20.
Many HELOCs are attached to a readvanceable mortgage, where principal repaid on the mortgage becomes available room on the line.
HELOC versus a home equity loan
- HELOC: revolving limit, variable rate, interest-only minimum payments possible, flexible draws over time.
- Home equity loan: a one-time lump sum, often at a fixed rate, repaid on a set schedule.
Both are secured by your home and both sit behind or alongside the first mortgage. A HELOC payment calculator shows how interest-only minimums behave as rates move.
Why it matters, and the risks
Because the minimum payment may cover interest only, the balance can remain outstanding for years, and an increase in prime rate raises the cost immediately. The home secures the debt, so missed payments can put the property at risk. Many HELOCs are demand facilities, meaning the lender can reduce the limit or require repayment under the agreement — check the terms before signing. Lenders also assess income, credit score, and total debt service before approving or increasing a limit.
Used carefully, a HELOC can fund renovations or consolidate higher-interest debt; the guide on HELOCs in Canada covers how lenders structure them.
Frequently asked questions
How much can I borrow with a HELOC in Canada?
The revolving portion is typically capped at 65% of your home's appraised value, and combined borrowing across all loans secured by the home is generally limited to about 80%. The exact limit depends on your lender, income, credit history, and any existing mortgage balance. Confirm the current figures with your lender.
Is a HELOC interest-only?
Many home equity lines of credit allow interest-only minimum payments, which means the balance does not decline on its own. You can usually pay more, or convert part of the balance to a fixed-rate term if the lender offers it. Paying only interest keeps the debt outstanding longer and leaves you exposed to rising rates.
Can a lender cancel or demand repayment of a HELOC?
Many home equity lines of credit are demand facilities, meaning the lender can reduce the limit or require repayment under the terms of the agreement. Lenders may also freeze or lower limits when home values fall or if payments are missed. Read the credit agreement carefully before relying on the line.