Home Equity Line of Credit
Home Equity Lines of Credit in Ontario
Your equity, available when you need it.
A HELOC turns the equity you have already built into a credit line you can draw on, pay back, and draw on again. Used deliberately it is the most flexible borrowing you will ever have access to. Used carelessly it slowly becomes a second mortgage you never chose.
What a HELOC actually is
It is a revolving line of credit secured against your home. You are approved for a limit, and from then on you draw what you need, when you need it. Interest is charged only on what you have drawn, not on the limit. Most HELOCs are variable, moving with the lender’s prime rate, and most allow interest-only minimum payments.
Because it is secured against the house, the rate is far below anything unsecured, typically a small margin over prime rather than the high-teens of a credit card. That gap is the whole point, and it is also the trap: cheap money attached to your home is still money attached to your home.
How much you can borrow
The maximum a standalone HELOC can be, as a share of your home’s value. You need more than 35% equity to qualify for one.
The maximum for a HELOC combined with a mortgage. Your mortgage balance and your credit limit together cannot exceed this.
In practice most people hold the second kind, a readvanceable mortgage: one registration on title holding both a mortgage and a line of credit, where the credit limit grows as you pay the mortgage down. It is efficient, and it is also why so many homeowners are surprised to discover how much room they have available.
When it makes sense
Good reasons to have one
- Renovations staged over time. Draw as each phase invoices rather than borrowing the whole budget on day one and paying interest on money sitting idle.
- The down payment on a rental. Access equity without breaking your existing mortgage or paying a penalty.
- A cash-flow buffer if you are self-employed. Approved while your income looks strong, sitting unused until a slow quarter.
- Bridging a purchase and a sale when the closing dates do not line up.
- Replacing high-interest debt, but only alongside a plan that stops it rebuilding.
Where it goes wrong
- Interest-only forever. The minimum payment never reduces the balance. Ten years on, people are shocked the number has not moved.
- Rate sensitivity. It is variable. Every prime increase raises your payment with no term protecting you.
- Funding lifestyle. Consolidating cards then filling them again converts short-term debt into a lien on your home.
- Demand loans. Most HELOCs are callable in full at the lender’s discretion. Rare, but real.
- Qualifying room used up. Lenders count the full limit against you, not the balance, which can block the next purchase.
HELOC, refinance, or reverse mortgage
| Best for | Watch for | |
|---|---|---|
| HELOC | Amounts you will draw and repay repeatedly, or may not draw at all. | Variable rate, interest-only drift, callable. |
| Refinance | One known lump sum you want at a fixed rate over a set term. | Penalty to break the current mortgage; re-qualifying. |
| Reverse mortgage | Homeowners 55+ who want equity without monthly payments. | Higher rate; the balance compounds against the estate. |
Most of the time the honest answer is a combination, or none of them. That is the conversation worth having before you apply anywhere.
What qualifying actually looks like
A line of credit is underwritten like a mortgage, not like a credit card. Three things decide the answer, and the third one surprises people.
The three tests
- Equity. More than 35% of the value for a standalone line. 20% if it sits alongside a mortgage, with the two together capped at 80%.
- Income. Federally regulated lenders qualify you on the same stress test that applies to an uninsured mortgage: the greater of your contract rate plus two percent, or 5.25 percent.
- The full limit, not the balance. You are assessed as though the entire limit is drawn on day one. A line you never intend to touch still uses up borrowing room.
What the process looks like
- An appraisal, almost always. The lender needs a current value, not what the house down the street sold for.
- New registration on title, so legal work is involved unless the lender covers it.
- Two to three weeks from application to available funds is normal.
- If it replaces your existing mortgage registration, the timing has to be planned around your term rather than around your renovation.
Not sure how much room you actually have? The Equity Audit works it out from your balance and an estimate of your value, before you talk to anyone.
Setting one up in Ontario
The lending rules are federal, so the 65 and 80 percent limits are the same wherever in Canada you live. What changes locally is the appraisal and the legal work. In Ontario a line of credit is registered on title the same way a mortgage is, which means a lawyer or title company is involved at the start and a discharge is needed if you ever close it.
We are licensed across Ontario and work remotely as a matter of course, so where you are matters far less than it used to. Between us we are on the ground across Niagara, Hamilton and Halton, which helps on the days a lender wants a local appraiser at short notice.
Common questions
Does having a HELOC hurt my credit score?
Having one does not. Carrying a high balance against the limit does, the same way a maxed credit card does. Opening it also puts a hard inquiry on your file.
Can I get a HELOC if I still have a mortgage?
Yes. That is the common case. The mortgage plus the credit limit together cannot exceed 80% of the home’s value.
Is the interest tax deductible?
Only when the borrowed money is used to earn investment or business income, and only if the paper trail is clean from the start. Talk to your accountant before you draw, not after.
What happens at renewal?
A HELOC does not have a term the way a mortgage does, so there is nothing to renew. It stays open until you or the lender close it, which is exactly why it gets forgotten about.
Do I have to use it once I have it?
No. An approved, undrawn line costs nothing to hold at most lenders, which is the argument for setting one up while your income and equity both look their best.
Do I qualify on the whole limit or only what I draw?
On the whole limit. Lenders assess you as though every dollar of the line is already borrowed, which is why an unused line can still stop you qualifying for the next purchase. It is worth deciding the limit deliberately rather than taking the largest number offered.
What happens to my HELOC when I sell the house?
It is repaid out of the sale proceeds on closing and discharged from title, the same as a mortgage. There is usually a small discharge fee. Because it is secured against that specific property, it does not move with you.
Can the lender reduce or close my line?
Most lines of credit are demand facilities, which means the lender can reduce the limit or call the balance. In practice it is rare and usually tied to a change in your circumstances or the property value, but it is written into the agreement and worth knowing before you rely on the money.
Borrowing limits above follow the Financial Consumer Agency of Canada’s published guidance. Individual lenders may be more conservative, and the qualifying stress test applies. This page is general information, not advice on your specific situation.
Whether a line of credit is the right tool depends on what you are actually trying to do with the money. Fifteen minutes usually settles it.
Book a call
Let’s start with a conversation.
Thirty minutes. No pressure. No rate-shopping. We listen, we ask questions, and we tell you whether the mortgage you are thinking about is actually a win for your future.
Typical 24h-48h turnaround time for a fully underwritten pre-approval.
Who you actually work with
A line of credit is flexible right up until it is not. Both of us work every file, so the structure gets set with your next decision already in mind.
Kelly Foote
Mortgage Broker · FSRA #M21002713
Certified Divorce Specialist · Certified Canadian Reverse Mortgage Consultant
Niagara born and built, and the systems side of how a file actually gets run.
Lisa Reynolds
Mortgage Broker · FSRA #M15000477
Certified Canadian Reverse Mortgage Consultant
30+ years in the industry, and the lender strategy behind the harder files.
Fusion Mortgage Group is a team of licensed mortgage brokers with BRX Mortgage Inc., Mortgage Brokerage #13463.
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