HELOC FAQs: Requirements and Lenders in Canada

This FAQ is the second installment in our comprehensive three-part series on Home Equity Lines of Credit (HELOCs). This section is designed to help you navigate the practical side of securing a HELOC: Requirements and Lenders.

Building on the foundational concepts covered in our HELOC FAQs: Definitions and Basics, this guide provides clear, expert answers to your questions. Some of the questions below link to a more in-depth article, giving you the option to dive deeper into the topics that matter most to you.

We'll cover everything from what credit score you need to the different types of lenders you can work with—from traditional banks to private sources.

How to Qualify for a HELOC?

Qualifying for a HELOC depends on the lender, but all require an evaluation of your financial profile. Major banks are the most stringent, requiring a credit score of 680+ and stable income. B lenders are more flexible with scores above 550, while private lenders are equity-based and primarily focus on your home's value, not your credit history.

How Much Can You Borrow with a HELOC?

In Canada, you can typically borrow up to 65% of your home's appraised value as a standalone HELOC. When combined with a mortgage, your total borrowing—including both the mortgage and HELOC—cannot exceed 80% of your home's value. The amount you can borrow depends on your home’s value and your remaining mortgage balance.

How Much Equity Do You Need to Get a HELOC?

Most lenders require a minimum of 35% home equity for a standalone HELOC. If you are getting a HELOC as part of a readvanceable mortgage, you need a minimum of 20% down payment or equity. The more equity you have, the more you can borrow and the more favorable your terms are likely to be.

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Is a Credit Check Required for a HELOC?

Yes, a credit check is always required for a HELOC. Lenders perform a "hard inquiry" on your credit report to review your payment history and financial responsibility. While this may cause a small, temporary dip in your score, it is a necessary step in the application process.

What Is the Minimum Credit Score for a HELOC?

The minimum credit score for a HELOC is typically around 680 for traditional lenders, but some credit unions or alternative lenders may accept scores as low as 620. While you may still be approved with a lower score, a higher score above 720 significantly improves your chances of getting a lower interest rate and a larger credit limit.

What Is the Income Requirement for a HELOC?

Lenders require proof of stable income to ensure you can make payments, even though a HELOC is secured by your home. They will calculate your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to assess your affordability. Acceptable income sources include employment income, self-employment income (with a history of tax returns), and in some cases, pension or rental income.

Which Banks Offer HELOCs in Canada?

All of Canada’s major financial institutions, including the Big Five banks (RBC, TD, BMO, CIBC, and Scotiabank), offer HELOCs. Other providers include credit unions, which operate at the provincial level, and alternative lenders that may be more flexible with their qualification criteria.

Who Are the Best HELOC Lenders in Canada?

The "best" lender depends on your specific financial situation. For borrowers with strong credit and stable income, major banks often offer the most competitive rates. For those with bad credit, irregular income, or who are self-employed, an alternative lender or private lender may be a better option, as they are often more flexible.

What Documents Do You Need to Get a HELOC?

Proof of income: Pay stubs, T4s, or tax returns (Notice of Assessment).

Property information: A recent appraisal or property tax statement.

Mortgage details: A statement showing your current mortgage balance.

Credit history: A credit check will be performed by the lender.

Personal ID: Government-issued identification.

What Is the Process for Getting a HELOC?

Consult a broker: Speak with a mortgage professional to assess your eligibility and borrowing power.

Gather documents: Collect all necessary paperwork, including income verification and property details.

Submit the application: Your broker will apply to various lenders on your behalf.

Underwriting and appraisal: The lender will review your file and may order a property appraisal.

Receive funds: Upon approval, your HELOC will be set up, allowing you to access funds as needed.

How to Apply for a HELOC Online in Canada?

You can apply for a HELOC online by filling out an application on a lender’s website or a mortgage broker's platform. The online form will require personal, income, and property details. An online application is a convenient way to start the process, and a representative will follow up to collect additional documents.

Do You Need an Appraisal for a HELOC?

Yes, a home appraisal is almost always required for a HELOC. An appraiser will inspect your home to determine its current market value. This valuation is a critical part of the process because it allows the lender to calculate your home's equity and your maximum borrowing limit.

How Long Does It Take to Get a HELOC?

The process for getting a HELOC typically takes three to six weeks. The timeline can vary depending on the lender's workload, how quickly you provide the required documents, and the time it takes to schedule and complete the property appraisal.

Can You Get a HELOC with Bad Credit?

Yes, you can get a HELOC with bad credit, but you will likely need to work with an alternative or private lender. These lenders often prioritize your home's equity over your credit score, making them a viable option for homeowners who don't qualify with a traditional bank.

Can You Get a HELOC with a Consumer Proposal?

Yes, it is possible to get a HELOC with a consumer proposal, but you will need to find a specialized lender. Mainstream banks typically will not approve a HELOC for a borrower with an active consumer proposal. Private and alternative lenders are more likely to approve your application, as they primarily focus on your home's equity.

Can You Get a HELOC with No Job?

Getting a HELOC with no job is challenging but possible, especially if you have a significant, verifiable income source other than employment, such as pension payments, investment income, or rental income from another property. Lenders will still require proof that you can afford the payments.

Can You Get a HELOC on a Rental Property?

Yes, you can get a HELOC on a rental property, but the requirements are often stricter than for a primary residence. Lenders may require a higher amount of equity and a more conservative loan-to-value (LTV) ratio. They will also assess the rental income to ensure you can service the debt.

How Does a HELOC Affect My Credit Score?

A HELOC can affect your credit score in two main ways. The initial application results in a hard inquiry, which can cause a small, temporary drop. Once approved, the HELOC will appear on your credit report. If you make payments on time, it can help improve your score, but if you carry a high balance, it may negatively impact your credit utilization ratio.

HELOC Requirements and Lenders in Canada

We trust this guide has provided you with a clear understanding of the requirements and lenders for a Home Equity Line of Credit. To complete your journey, we invite you to explore the final part of our series: HELOC FAQs: Costs, Benefits & Uses.

If you're ready to take the next step or have specific questions about your unique financial situation, our award-winning team at 360Lending is here to help. Contact us for a personalized, no-obligation consultation to discuss your home equity financing options.

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