Products and terms
Home equity line of credit (HELOC)
A revolving line of credit secured against your home, priced at prime plus a spread and capped at 65% of value on its own.
Also called HELOC.
A HELOC works like a credit card secured by your house. You draw what you need, pay interest only on what you've drawn, and the balance revolves. The rate is prime plus a spread, and it changes as soon as prime moves. There's no term and no rate hold.
OSFI Guideline B-20 caps a standalone revolving HELOC at 65% of the property's value. You can reach 80% combined if the portion above 65% is an amortizing mortgage, which is how a readvanceable mortgage works.
Watch for 2 things. With interest-only payments, the balance only falls if you pay it down. And lenders qualify you on the full limit as if you'd drawn all of it, so a large unused line reduces what you can borrow elsewhere.
For a large, long-term need, a refinance is usually cheaper and better structured. A HELOC is better for flexibility and repeated access.
Related terms
Equity
The difference between what your home is worth and what you still owe on it.
Prime rate
Each lender's own reference rate for variable lending, set with reference to the Bank of Canada's policy rate.
Refinance
Replacing your mortgage with a larger one and taking the difference in cash, capped at 80% of the property's value.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
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