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Calculate your home equity line of credit limit, monthly interest payments, and see how a HELOC compares to refinancing your mortgage.
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How a HELOC actually differs from refinancing
Both let you access the equity built up in your home, but they work in fundamentally different ways — and picking the wrong one for your situation can cost thousands in unnecessary interest.
A HELOC is a flexible line of credit, not a lump sum
A Home Equity Line of Credit gives you access to a pool of money — typically up to 65% of your home's value combined with your existing mortgage, capped at 80% total — that you can draw from as needed, repay, and draw from again. You only pay interest on what you've actually withdrawn, not the full approved limit. This makes a HELOC well suited to ongoing or unpredictable expenses: a renovation that happens in phases, an emergency fund you hope not to touch, or bridging cash flow for a small business.
Refinancing replaces your entire mortgage
Refinancing means breaking your current mortgage and replacing it with a new, larger one — pulling out the difference in equity as a lump sum at closing. This usually comes with a prepayment penalty for breaking your existing term early, calculated as either three months' interest or the interest rate differential (IRD), whichever is higher. For a large, one-time expense — buying a second property, paying off high-interest debt in full, a major one-time renovation — refinancing can offer a lower rate than a HELOC, but the upfront penalty needs to be factored into the real cost.
Why HELOC rates are usually higher than your mortgage rate
HELOCs are typically priced at prime rate plus a margin (often prime + 0.5% to prime + 1%), and almost always carry a variable rate — there's no fixed-rate HELOC option from most major lenders. This means your HELOC payment moves every time the Bank of Canada changes its overnight rate, which can catch borrowers off guard during a rate-hiking cycle. A mortgage refinance, by contrast, can be locked into a fixed rate for up to five years, trading some flexibility for payment certainty.
The interest-only trap
Many HELOCs only require interest-only payments on the amount drawn, which keeps the minimum payment low but means the principal never shrinks unless you deliberately pay it down. It's easy to draw on a HELOC for a few years making only interest payments and end up no closer to being debt-free than the day you opened it. If you're using a HELOC for anything beyond a short-term bridge, it's worth setting your own principal repayment schedule rather than relying on the lender's minimum.
Results are estimates for informational purposes only — not financial advice. Always consult a licensed professional before making decisions. Terms of use →
HELOC frequently asked questions
Key rules for home equity lines of credit in Canada.
How much can I borrow with a HELOC in Canada?
Under OSFI rules, you can borrow up to 65% of your home's appraised value through a HELOC. However, your combined mortgage balance plus HELOC cannot exceed 80% of your home's value. So your practical limit is the lower of: (home value × 65%) or (home value × 80% − mortgage balance).
What is the current HELOC interest rate in Canada?
HELOC rates in Canada are variable and tied to the Bank of Canada's prime rate. As of 2026, the prime rate is 4.95%. Most HELOCs are priced at prime + 0.5% to prime + 1%, giving rates of approximately 5.45%–5.95% for qualified borrowers (680+ credit score). Non-prime borrowers face higher rates.
Is a HELOC or refinancing better?
It depends on your situation. A HELOC offers flexibility — you only pay interest on what you draw, and you can repay and re-borrow freely. Refinancing gives you a fixed rate and structured repayment. If you need a lump sum for a specific purpose and rates are favourable, refinancing may be cheaper long-term. If you need flexible access to funds over time, a HELOC is better. This calculator compares both monthly payments for your scenario.
Do I need to pass a stress test for a HELOC?
Yes. You must qualify at the higher of your contract rate + 2% or 5.25% — the same stress test that applies to mortgages at federally regulated lenders.
Is HELOC interest tax deductible in Canada?
If you use the HELOC funds to earn income (e.g., invest in stocks, rental property), the interest may be tax deductible under CRA's "direct tracing" principle. If you use the funds for personal expenses (vacation, renovation), the interest is not deductible. Always consult a tax advisor for your specific situation.
More Canadian calculators
View all tools →Smart ways to use a HELOC in Canada
A HELOC is one of the most flexible financial tools available to homeowners — used wisely.
Home renovations that increase value, investment portfolio contributions (interest may be tax-deductible), emergency fund backup, bridging a home purchase, or consolidating high-interest debt at a lower rate. The key: have a clear repayment plan.
Vacations, cars, weddings, or everyday expenses. Using your home equity for depreciating or consumable items is dangerous — if home values fall, you could owe more than your home is worth. Variable HELOC rates mean payments rise when the Bank of Canada increases rates.
Under OSFI guidelines, standalone HELOCs are capped at 65% LTV. Combined with your mortgage, total borrowing cannot exceed 80% of your home's value. You must also pass the same stress test as a mortgage applicant — qualifying at max(contract rate + 2%, 5.25%).
CRA's "direct tracing" rule: if you borrow through your HELOC to invest in income-producing assets (stocks, rental property), the interest may be tax-deductible. This is the "Smith Manoeuvre" strategy. If you use it for personal expenses, no deduction. Always consult a tax advisor.