Home Equity Line of Credit (HELOC) and Equity Take Outs in Ontario

Key Takeaways: A HELOC lets you borrow against your home equity as a revolving line of credit, up to 65% of your property value. You only pay interest on the amount you use. HELOC rates are variable, tied to Prime. An equity take out through refinancing can access up to 80% of your home’s value. Which option is better depends on how much you need, how long you need it, and your current mortgage terms.

If you own a home in Ontario and have been making mortgage payments for a few years, you’ve likely built up equity. That equity can be a powerful financial tool. Whether you need funds for renovations, debt consolidation, education, or investment purposes, accessing your home equity is often the most cost-effective borrowing option available to you.

There are two main ways to access your equity without selling: a Home Equity Line of Credit (HELOC) or an equity take out through refinancing. Canadian Mortgage Services has been helping Ontario homeowners access their equity since 1988, and we’ll help you figure out which option makes the most sense for your situation.

What Is a HELOC

A HELOC works like a regular line of credit, except it’s secured against your home. This means the rates are significantly lower than unsecured credit products. You’re approved for a maximum credit limit, and you can borrow and repay against that limit as often as you want. You only pay interest on the outstanding balance, not the full limit.

For example, if you’re approved for a $200,000 HELOC but only use $50,000, you pay interest only on the $50,000. If you pay it back down to zero, you owe nothing. If you need it again later, the full $200,000 is still available to you without reapplying.

How Much Can You Access

The maximum HELOC amount is capped at 65% of your home’s appraised value. However, the combined total of your mortgage plus HELOC cannot exceed 80% of your home’s value. Here’s how the math works:

Say your home is appraised at $900,000 and you owe $350,000 on your first mortgage. The maximum combined lending is $720,000 (80% of $900,000). Since you already owe $350,000, you could potentially access up to $370,000 through a HELOC. But the HELOC portion itself is also capped at 65% of value ($585,000), so in this case, $370,000 is well within both limits.

Use our home equity calculator to see how much you could access based on your own numbers.

HELOC vs Refinance: Which Is Better?

If you need a specific lump sum for a defined purpose (like paying off $80,000 in debt), refinancing often makes more sense because you can lock in a fixed rate. If you want flexible access to funds over time (ongoing renovations, business expenses, investment opportunities), a HELOC gives you that revolving flexibility.

HELOC Rates and Payments

HELOC rates in Canada are variable, typically expressed as Prime plus or minus a spread. If Prime is 5.45% and your HELOC is at Prime + 0.50%, your effective rate is 5.95%. When Prime changes (following Bank of Canada rate decisions), your HELOC rate changes with it.

Payments on a HELOC are interest-only, which keeps them low relative to a standard mortgage payment. On a $100,000 balance at 6%, you’d pay roughly $500 per month in interest. You can always make voluntary principal payments to reduce your balance faster. Check our HELOC payment calculator for specific numbers.

Qualification Requirements

HELOCs require full income qualification, just like a regular mortgage. You’ll need to demonstrate sufficient income, provide documentation (pay stubs, T4s, tax returns for self-employed), and have a credit score of at least 650 for most prime lenders. The property will typically require an appraisal.

If your credit isn’t strong enough for a traditional HELOC, a second mortgage can serve a similar purpose with more flexible qualification criteria, though the rate will be higher.

Common Uses for Home Equity

Renovations and home improvements. Using equity to renovate can increase your property value, potentially giving you a positive return on the investment. Kitchen and bathroom renovations, basement apartments, and energy efficiency upgrades tend to add the most value.

Debt consolidation. Replacing credit card debt at 20% with a HELOC at 6% can save thousands per year in interest. Our debt consolidation page has more details and examples.

Investment. Some homeowners use their equity to invest in additional real estate, their business, or financial markets. The interest on funds used for investment purposes may be tax-deductible (consult your accountant).

Education. Funding post-secondary education for yourself or a family member at HELOC rates is significantly cheaper than student loans or lines of credit from the bank.

Ready to see how much equity you can access? Contact us or call 905-455-5005 for a free assessment.