How to Get a Home Equity Loan or HELOC in Canada
In Canada the standard home equity product is the HELOC — a revolving line of credit secured by your home, repayable and re-drawable like a credit card. Federal rules cap the HELOC itself at 65% of your home's value, with total mortgage-plus-HELOC borrowing capped at 80%.
The Steps
Follow these in order
Each card shows the phase, expected time, and any cost. Data checked against official CAN sources(2025-Latest).
0 of 6 steps
- Before You Go 20 min
Calculate your available equity against the caps
Canadian rules set two limits: the HELOC alone can be no more than 65% of your home's appraised value, and your total mortgage + HELOC borrowing can reach at most 80% of value. A $600,000 home with a $300,000 mortgage: total borrowing caps at $480,000 (80%), so up to $180,000 of new borrowing is possible — but the HELOC portion cannot exceed $390,000 (65%), which this clears easily. Check both numbers before shopping.
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- Before You Go 30 min
Choose the structure: HELOC, readvanceable, or lump sum
A standalone HELOC is a separate line of credit. Most Canadians combine: a readvanceable mortgage pairs your regular mortgage with a HELOC limit that grows automatically as you pay the mortgage down. For one-time known costs, some lenders offer a fixed-rate home equity loan (lump sum, fixed payments) — less common in Canada than the US, but worth asking about when you want payment certainty.
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- Before You Go 20 min
Check that you pass the stress test
Since 2018, HELOCs and refinance lending are stress-tested at the greater of the contract rate + 2% or the Bank of Canada benchmark qualifying rate — the same test as a mortgage. Your credit score (typically 680+ wanted by big banks), debt-service ratios, and provable income all count. Self-employed borrowers should expect to show 2–3 years of notices of assessment and possibly stated-income options at credit unions.
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- Go 1–2 days
Compare banks and credit unions
Big banks (RBC, TD, Scotiabank, BMO, CIBC) offer HELOCs at prime + 0.5–1%; credit unions and trust companies can be more flexible on qualifying and lend behind larger mortgages. Compare: rate margin over prime, setup and appraisal fees, whether interest-only payments are allowed during the draw period, and the minimum amount you must draw. Your existing mortgage holder is often fastest since they already hold the charge.
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- Fill / Prepare 2–4 weeks
Apply, get appraised, and complete legal work
The lender orders an appraisal and runs the full underwrite — income, credit, property title. A lawyer or notary (Quebec) registers the charge and handles discharge of any existing registrations if you are refinancing. Expect total setup costs of roughly $300–$1,500 including appraisal, title search, and legal.
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- Follow Up
Use the line with discipline
A HELOC is secured by your home: missed payments can lead to power of sale — the Canadian foreclosure process. Interest-only minimum payments are a feature and a trap; the balance never shrinks by itself. Common smart uses: renovations that build value, consolidating high-rate debt with a written plan to retire the balance, or an emergency reserve you hope never to draw. Avoid using home equity to fund lifestyle spending.
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FAQ
Frequently Asked Questions
What is the difference between a HELOC and a home equity loan in Canada?
A HELOC is revolving credit — you draw and repay as needed, at a variable rate tied to prime, with the option of interest-only payments. A home equity loan (less common in Canada) is a fixed lump sum with fixed payments. Canadians often get HELOC-equivalent borrowing through a readvanceable mortgage, which raises your available credit as you pay down the principal.
How much can I borrow against my home in Canada?
The HELOC portion is capped at 65% of your home's appraised value, and total registered debt (mortgage + HELOC) at 80%. So a fully paid-off $500,000 home supports a $325,000 HELOC; a home with a large mortgage has less room. Your income, credit, and the stress test set the final approved amount below those ceilings.
Is HELOC interest tax-deductible in Canada?
Only if the borrowed money is used to earn investment or business income — the CRACanada Revenue Agency — Canada's tax agency. It administers income tax, benefits like the GST/HST credit, and CRA My Account.Click for official info ↗'s direct-use test. Money used for renovations, a car, or debt consolidation produces non-deductible interest. Some Canadians use the "Smith Maneuver" (reborrowing paid-down mortgage equity to invest) to create deductible interest; that is an advanced strategy with real risk — get professional advice before attempting it.
What happens if I cannot pay my HELOC?
The lender can call the loan and begin power of sale — a process that in Ontario and most provinces lets the lender sell the home without court involvement. Because the debt is registered against title, even unsecured-looking financial trouble can end in losing the house. If payments become difficult, contact the lender about a payment plan before missing instalments, and consider credit counselling (non-profit, e.g. Credit Counselling Society).
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