- A HELOC can give you revolving credit of up to 65% of your home’s value, and total borrowing against a home is generally capped at 80%.
- A standalone HELOC needs more than 35% equity; one combined with a mortgage needs 20%.
- Most HELOCs have variable rates tied to the lender’s prime rate, and banks require you to pass the stress test.
- A home equity loan is a one-time lump sum with fixed payments; a HELOC lets you borrow, repay and borrow again.
Checked October 2026
How a HELOC works
A HELOC is revolving credit secured by your home. Like any line of credit, you draw what you need up to your limit, pay it back and use it again, and you only pay interest on the amount you’ve borrowed. Your lender may ask for interest-only payments or for part of the principal plus interest, and you can repay the balance at any time.
Because your home is the collateral, HELOC rates are often lower than unsecured loans and credit cards. Most are variable and based on the lender’s prime rate. FCAC’s example: at prime plus 1%, a 5.85% prime rate means you’d pay 6.85%. When the Bank of Canada changes its policy rate, your lender’s prime rate may change too, and so can your payment. A federally regulated lender must tell you in writing within 30 days of changing your rate.
You can usually draw on it through online banking, the lender’s app, a branch or by phone, and some lenders add cheques or a HELOC access or debit card. Interest starts as soon as the money leaves the line.
The two kinds of HELOC
Combined with a mortgage
Sold with your mortgage by the same lender, sometimes called a readvanceable mortgage. As you pay down principal, the credit available on the line grows. You need at least 20% equity.
Standalone HELOC
Separate from any mortgage, so it can come from a different lender, or exist with no mortgage at all. The limit doesn’t grow as you pay down a mortgage. You need more than 35% equity.
Some people use a standalone HELOC instead of a mortgage to buy a home. FCAC points out the trade-offs: you choose how much principal to repay and can pay it off any time without a prepayment penalty, but you need a bigger down payment and more equity, and the rate may be higher.
The 65% and 80% borrowing limits
Your home equity is what your home is worth minus everything secured against it: your mortgage, any HELOC and other secured loans. FCAC’s example is a $500,000 home with $200,000 left on the mortgage, which leaves $300,000 of equity, or 60% of the home’s value.
Two limits then shape what a lender can offer:
- 65% for revolving credit. FCAC says you may borrow up to 65% of your home’s value with a HELOC. The banking regulator, OSFI, expects federally regulated lenders to cap the revolving, interest-only part of home-secured credit at 65% loan-to-value.
- 80% overall. Anything a lender advances above 65% must be amortizing (paid down on a schedule) and can’t be re-borrowed, and the total can’t exceed 80% of the home’s value, the legal maximum for uninsured mortgages.
On a $500,000 home, 65% is $325,000 and 80% is $400,000. What you actually get depends on what you still owe, which type of HELOC you have, the appraisal and your income. Banks also make you pass the stress test, qualifying you at the higher of 5.25% or your rate plus 2%.
HELOC vs home equity loan vs refinance
A HELOC is one of several ways to borrow against your home. FCAC compares them like this:
| Option | How much | Rate | How you get the money |
|---|---|---|---|
| HELOC | Up to 65% of appraised value | Variable, moves with market rates | As needed, using regular banking; repay and re-borrow |
| Home equity loan | Up to 80% of appraised value | Fixed or variable, generally higher than a mortgage | One lump sum, repaid in fixed payments; can’t re-borrow |
| Refinance (equity release) | Usually up to 80% of your home’s value, minus what you owe | Set by your new mortgage terms | Added to your mortgage; may mean new terms and an insurance premium |
| Second mortgage | 80% of appraised value minus your mortgage balance | Usually higher than a first mortgage | One lump sum, with payments on top of your first mortgage |
| Reverse mortgage (usually 55+) | Up to 55% of appraised value, minus your mortgage balance | Generally higher than a mortgage | Lump sum or instalments; no payments until you sell or move |
Source: FCAC, Borrowing against home equity. Refinancing also requires the stress test.
In short: a home equity loan or refinance suits a one-time cost you want paid off on a schedule, while a HELOC suits costs that come in stages, like a renovation, or a safety net you may not use. If you’re 55 or older and don’t want payments, see our note on reverse mortgages.
Costs and paperwork
Setting up a HELOC isn’t free. Expect some or all of these:
- A home appraisal, and legal fees for a lawyer (or notary in Quebec) to register your home as collateral
- A title search to make sure there are no liens on your home
- Administration or monthly fees, depending on the lender
- Cancellation and discharge fees when you close or move the HELOC
You’ll typically provide proof you own the home and your mortgage details, including the balance, term and amortization. Lenders may offer optional credit insurance, but you don’t need it to be approved.
Risks, and how to keep a HELOC under control
FCAC’s list of risks is worth reading before you sign: payments can jump when rates rise, you could lose your home if you can’t repay, it shrinks the equity you’d have if you sell, easy access can lead to more debt, and if you only pay the interest you’ll never pay it off. If you sell your home, the HELOC must be repaid.
- Name the purposeDecide up front what the money is for, such as a renovation, and what it isn’t.
- Budget the drawBorrow only what the plan needs. Our budget calculator helps size the payment.
- Pay more than interestSet a repayment schedule above the minimum. FCAC says it can significantly reduce your interest costs.
- Turn on alertsAsk for an alert when your available credit falls below a set amount.
Frequently Asked Questions
What is a HELOC?
A home equity line of credit is revolving credit secured by your home. You borrow what you need up to a limit, pay interest only on what you’ve borrowed, and can repay and re-borrow at any time.
What is a home equity loan?
A home equity loan gives you a one-time lump sum of up to 80% of your home’s value. You pay interest on the whole amount, repay it in fixed payments on a set schedule, and can’t borrow it again once repaid.
What’s the difference between a HELOC and a home equity loan?
A HELOC is flexible: borrow, repay and borrow again up to 65% of your home’s value, usually at a variable rate. A home equity loan is a single lump sum with fixed repayments, up to 80% of value.
How much can I borrow with a HELOC in Canada?
FCAC says up to 65% of your home’s value, minus what you owe if the HELOC is standalone. Combined with a mortgage, total borrowing against the home can reach 80%, but only 65% can be revolving credit.
What are the HELOC rules in Canada?
OSFI expects federally regulated lenders to cap the revolving part of home-secured credit at 65% loan-to-value. Anything above 65% must be paid down on a schedule, the total can’t pass 80%, and banks require you to pass the stress test.
Do I need to pass the stress test for a HELOC?
Yes, at a bank. FCAC says you must qualify at the higher of 5.25% or your rate plus 2%, and the same applies when you refinance.
Can I get a HELOC without a mortgage?
Yes. A standalone HELOC is independent of any mortgage, so you can get one on a home you own outright, as long as you have more than 35% equity.
Are HELOC payments interest-only?
They can be. Your lender may require only the interest each month or part of the principal plus interest. Paying only interest means the balance never goes down.
What happens to my HELOC when I sell my home?
You have to pay it back from the sale, because the home is the collateral. Closing it can involve discharge and other fees.
Is a HELOC the same as refinancing?
No. Refinancing replaces or increases your mortgage, usually up to 80% of your home’s value, and pays out a lump sum. A HELOC is a separate line you draw on as needed, up to 65% of value.
Try this next
Sources, checked October 2026
- FCAC: Home equity lines of credit canada.ca
- FCAC: Borrowing against home equity canada.ca
- FCAC: Preparing to get a mortgage canada.ca
- OSFI: Treatment of innovative real estate secured lending products under Guideline B-20 osfi-bsif.gc.ca
- OSFI: Guideline B-20, residential mortgage underwriting practices and procedures osfi-bsif.gc.ca
General information for Canadians, not financial, tax or legal advice. Rules and menus change, so confirm details with your bank, lender or the Government of Canada. See our methodology.