HELOC FAQs: Requirements and Lenders in Canada

Struggling to figure out if you qualify for a home equity line of credit, and who you can trust to be your lender? This is where many Ontario homeowners feel discouraged, especially if traditional banks have already rejected them due to income or credit score challenges.

This is why 360Lending wrote this guide: Because we specialize in alternative financing. We negotiate directly with B lenders and private lenders who can be more flexible with their qualifications compared with major banks. This second part of our guide clarifies the specific requirements and shows you precisely which lenders can actually help you secure the capital you need.

Get clarity on what it takes to qualify right now, then you can explore our other guides on:

• HELOC FAQs: Definitions and Basics

• HELOC FAQs: Costs, Benefits, and Uses

• HELOC Rates in Ontario

What Is the Process for Getting a HELOC?

The process for getting a HELOC begins by consulting a broker to assess your eligibility and borrowing power. Next, you must gather documents (proof of income and property details) before submitting the application to your chosen lender. The lender then moves to underwriting and appraisal, reviewing your file and verifying the home's value. Finally, upon approval, your HELOC will be set up, allowing you to access the funds immediately as needed.

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.

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.

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.

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.

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.

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.

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 two to three 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 from a Different Bank?

Yes, you can get a HELOC from a different bank than your primary mortgage provider. This is known as a standalone HELOC and requires the new lender to register a second mortgage on your property's title. Since this new lien is subordinate, the first mortgage remains intact. This allows homeowners to shop for the best rate on the line of credit without affecting their primary mortgage terms.

Can You Increase Your HELOC Limit?

Yes, you can increase your Home Equity Line of Credit (HELOC) limit, but it requires a full re-qualification similar to a new loan application. The key condition is having sufficient new home equity, verified by an appraisal, and demonstrating that your income and credit score are strong enough to support the higher potential credit limit.

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 Income?

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.

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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