How does a HELOC work?

In Canada, a home equity line of credit (HELOC) is a revolving line secured on your home: you borrow up to a set limit, repay, and borrow again. You pay interest only on the amount you have drawn. With a federally regulated lender, the revolving limit can be up to 65% of your home's value, and your mortgage and HELOC together can reach 80%.

The basics of a HELOC

A HELOC works like a large line of credit, except that your home is the security. Because your home secures the line, a HELOC's rate is usually lower than an unsecured line of credit, and missing payments puts your home at risk.

Key features:

A credit limit set by the lender, based on your home's value, what you owe, and your income.
A variable rate in most cases, usually tied to the lender's prime rate, so the cost changes when prime moves.
Flexible payments: many HELOCs require only the monthly interest, with no set schedule to repay the balance.
Reusable credit: as you repay, the room becomes available again.

How the limits work

OSFI's rules for federally regulated lenders cap the revolving, non-amortizing part of a HELOC at 65% of your home's value. Combined with an amortizing mortgage (one paid down on a schedule), the total can go up to 80%. Anything above 65% has to be on the amortizing part (sources: OSFI and the Financial Consumer Agency of Canada, checked October 2026).

For example, with illustrative figures, on a home valued at $800,000 with a $400,000 mortgage:

80% of $800,000 is $640,000, the total you could owe.
Subtract the mortgage: up to $240,000 of combined room.
The HELOC limit on its own can be no more than 65% of value, $520,000, so in this case the $240,000 fits under that cap.

The final limit also depends on qualifying and is subject to lender approval.

Qualifying for a HELOC

Lenders generally qualify you as if the full limit were drawn. A federally regulated lender also uses the stress test: the greater of your contract rate plus 2 percentage points, or 5.25%. Your housing costs and other debts must fit within the lender's limits. A HELOC is often easier to set up while your income is stable, rather than when you suddenly need it.

Where HELOCs come from

Banks, credit unions and many monoline lenders offer HELOCs, either on their own or as part of a combined mortgage-and-line product. Alternative lenders sometimes offer equity lines too, at higher cost. If a HELOC is not available, a refinance or a second mortgage may be the alternatives to compare.

What to do next

To estimate your own HELOC room, try the HELOC room tool; results are estimates only, not an offer or advice. Or use our call-me-back form to talk through whether a HELOC fits.

Common follow-up questions

Do I have to use the HELOC once it is set up?

No. Many people set up a HELOC as a reserve and draw on it only when needed. Some lenders charge a set-up fee or ask for an appraisal, so ask about costs.

Can the lender lower my limit?

Generally, yes. Lenders usually have the right to review and change a HELOC's terms, and your agreement sets out how. Read that section before relying on the line for a large project.

Is HELOC interest tax-deductible?

Deductibility depends on how you use the money. Interest on money borrowed to earn investment income may be deductible in some cases; ask your accountant.