Interested in a Home Equity Line of Credit in Ontario?

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We help homeowners get the lowest rates for home equity loans, home equity lines of credit, refinancing, and other mortgage products.

👉 Click here to talk to us about getting a HELOC.

A Home Equity Line of Credit, or HELOC, is one of the most flexible borrowing tools for Canadian homeowners. If you’ve built up some equity in your home and want access to low-interest funds—whether for renovations, debt consolidation, or just to have an emergency cushion—a HELOC could be a great solution.

But how does it actually work? How do you qualify, and what’s involved in getting one? Let’s break it down in plain English.

What Is a HELOC?

A HELOC is a revolving line of credit that uses your home as collateral. It works a bit like a credit card, but with lower interest rates and much higher borrowing limits. Because it’s tied to your home equity, it gives you access to cash without having to sell or refinance your property.

Here’s how it works:

You’re approved for a credit limit based on your home equity

You can borrow, repay, and borrow again without reapplying

You only pay interest on the amount you actually use

How Do You Qualify for a HELOC?

To qualify for a HELOC in Canada, you must be a homeowner with enough equity in your property—and your income, credit score, and debt levels must meet the lender’s requirements.

Here’s what lenders look for:

For Major Banks (A Lenders):

Credit score: 680 or higher

Debt-to-income ratios:

Gross Debt Service (GDS): under 39%

Total Debt Service (TDS): under 44%

Stable income and a strong repayment history

For B Lenders (alternative lenders):

Credit score: 550 and up

Debt-to-income ratios:

GDS: under 50%

TDS: under 50%

More flexibility with income types (e.g. self-employed, commission-based)

As long as you have enough equity and can show you can afford the payments, a mortgage broker can often find you options—even if the big banks say no.

How Do You Apply for a HELOC in Canada?

A HELOC is always secured against your home and registered on your property’s title, but there are two main ways it can be structured:

1. Mortgage + HELOC Combo (Readvanceable Mortgage)

This is the most common setup from major banks. Your mortgage and HELOC are combined into a single product, and as you pay down your mortgage, your HELOC limit can increase automatically.

Offered by big lenders like RBC, TD, and Scotiabank

Requires qualifying under stricter guidelines

Great if you want a long-term, flexible borrowing tool

2. Standalone HELOC in Second Position

If you already have a mortgage and don’t want to break it—or you don’t qualify for a bank HELOC—a broker can arrange a second-position HELOC from a B lender.

Doesn’t interfere with your existing mortgage

Ideal for debt consolidation or short-term cash flow

Faster setup, more flexible qualifying, higher rates

You can go through a mortgage broker to access both types. If the banks say no, brokers have access to alternative lenders who specialize in HELOCs for homeowners with unique situations.

How Do You Use a HELOC?

Once the HELOC is open, you can borrow and repay as needed. The money is accessible through online banking, cheques, or even a credit card linked to the line of credit.

You can use it for almost anything, including:

Renovations or home upgrades

Consolidating high-interest credit card debt

Helping with education costs or tuition

Starting a business

Building an emergency fund

Investing (with proper strategy)

You don’t need to borrow the full amount at once—only take what you need, and only pay interest on what you’ve used.

How Does Interest Work for a HELOC?

One of the biggest advantages of a HELOC is that you only pay interest on the amount you use—not the full credit limit.

For example:

You have a HELOC with a $150,000 limit

You borrow $30,000

You’re only charged interest on the $30,000

Interest Rates:

Major Banks (A Lenders):

Rates are typically prime + 0.50%

As of mid-2025, with prime at 4.95%, that puts HELOC rates around 5.45%

B Lenders (Second-Position HELOCs):

Rates usually start around 7.49%

These apply when the HELOC is behind your existing mortgage

Interest is calculated daily and charged monthly. Most HELOCs are interest-only, which means your minimum monthly payment is just the interest owed—giving you flexibility with your cash flow.

How Does a HELOC Compare to Other Options?

One of the biggest reasons Canadians choose a HELOC is flexibility. But how does it actually compare to other ways of borrowing?

Credit Cards

Interest Rate: Credit cards charge 19% or more; HELOCs can be as low as 5.45%.

Flexibility: Both let you borrow and repay on your own terms.

Limit: HELOCs usually have much higher limits—often over $100,000.

Personal Loans

Interest Rate: Personal loans range from 9% to 22%+. HELOCs are lower.

Repayment: Loans have fixed monthly payments; HELOCs offer interest-only payments.

One-Time Use: Loans are a lump sum. HELOCs give ongoing access.

Mortgage Refinance

Rates: Refinance rates may be lower than HELOCs—but you have to replace your entire mortgage.

Fees: Breaking your mortgage may come with penalties. HELOCs can be added separately.

A HELOC sits somewhere between a credit card and a second mortgage. You’re not forced into a big loan, but you still get access to large amounts of credit when you need it.

What Are the Pros of Using a HELOC?

Let’s look at the upsides:

Low Interest Rates

Compared to credit cards and personal loans, HELOCs offer significantly lower rates—especially if you qualify through a major bank.

Flexible Access to Funds

You’re not stuck with one lump sum. You can borrow what you need, when you need it, and pay it back at your own pace.

Interest-Only Payments

The required payments are low because they only cover interest. This helps with cash flow, especially during emergencies or big projects.

Large Credit Limits

Depending on your equity, HELOCs can offer access to $50K, $100K, or even more—far beyond what you’d get with a credit card or personal loan.

No Need to Reapply

Once approved, your HELOC stays open. You can reuse it as needed without starting a new application every time.

What Are the Risks or Downsides of a HELOC?

Like any borrowing tool, a HELOC has some risks—especially if it’s not used carefully.

You’re Using Your Home as Collateral

This is the biggest one. If you fall behind on payments or default, the lender can take legal action, and you could lose your home.

Variable Rates Can Increase

HELOC rates usually go up when the Bank of Canada raises rates. Your payments could increase if the prime rate changes.

Overborrowing Is Tempting

With a large credit limit, it’s easy to overspend. Discipline is key.

Tips for Using a HELOC Wisely

To get the most benefit from your HELOC and avoid the common pitfalls, keep these tips in mind:

Use it for strategic reasons, like renovations, debt consolidation, or investments—not day-to-day spending

Pay more than interest only whenever possible, to reduce your balance

Avoid maxing it out—just because you can borrow $100K doesn’t mean you should

Set a budget or repayment plan to stay on track

Work with a mortgage broker to find the best setup for your needs, especially if the banks say no