Home equity lines of credit (HELOC) in the GTA

A home equity line of credit is a revolving loan secured against your home. It is approved once for a set limit, and you pay interest only on what you actually draw.

When a HELOC fits

• You are renovating in stages and do not want to borrow the whole budget on day one.
• You want an emergency reserve in place before you need it, at a rate far below a credit card.
• You are self-employed with uneven income and want a buffer between slow months.
• You are buying an investment property and need flexible access to the down payment.
• You want to keep your current low-rate mortgage untouched.

What to know before you draw

• Federal rules cap the revolving portion at 65% of your home's value, and 80% when combined with a mortgage.
• HELOCs are almost always variable and tied to prime. If prime moves, your cost moves the same month.
• Best when the amount you need is uncertain or staged, such as a renovation.
• A refinance is usually better when you know the exact amount and want the rate fixed.
• Set your own repayment schedule. Treating the interest-only minimum as the permanent plan is how a balance sits for a decade.
• Readvanceable products grow the credit line as the mortgage is paid down, but they are usually registered as a collateral charge, which costs more to move later.

Documents to gather

• Government photo ID for each applicant
• Income confirmation for each applicant
• Current mortgage statement
• Property tax bill and, for condos, the monthly maintenance fee
• Home insurance details

How a line is set up

1. 01 Set the right limitBigger is not automatically better. A large unused limit can reduce what other lenders will approve later.
2. 02 Qualify at the stress-test rateYou must qualify at the higher of the benchmark rate or your contract rate plus two percent, even though you may never draw the full limit.
3. 03 Appraisal and approvalThe lender confirms value and registers the charge, usually as a collateral charge against the property.
4. 04 Draw when you need itOnce registered, funds are available on demand for as long as the line stays in good standing.

Questions we get asked

How much can I get on a HELOC?

The revolving portion is capped at 65% of your home's value, and combined with any mortgage it cannot exceed 80%. On a $900,000 home with a $400,000 mortgage, the combined ceiling is $720,000, so up to roughly $320,000 could be available subject to qualifying.

Is the interest tax deductible?

Interest may be deductible when the borrowed funds are used to earn income, such as buying an investment property. It is not deductible for personal spending. Confirm your specific situation with an accountant, not with a mortgage agent.

What happens if rates go up?

Your interest cost rises immediately, because HELOCs are tied to prime. If you plan to carry a balance for years, a fixed refinance removes that exposure.

Can the lender reduce or cancel my limit?

Yes. HELOCs are generally demand facilities, which means the lender can review, reduce or call the line. This is uncommon but it is written into the agreement, and it is worth knowing before you rely on the line as your only backup.