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Home Equity Line of Credit Canada: The Complete Guide

What is a Home Equity Loan?

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Home Equity Line of Credit (HALOC) loans can help borrowers get loans by using the equity in their home. Loans secured against the value of the home are generally made using a revolving line of credit, making them different from a classic mortgage.

When opening your home to borrow, your lender will utilize the house you own for this credit and give you competitive interest rates on it. In return, you’ll be required to make regular monthly payments.

A home equity line of credit also gives them an interest claim in your property for failing to repay your loan. Home equity credit can be obtained from home owners who own 65% or more of the property.

How Does HELOC Work in Canada?

For a home equity line of credit in Canada, the application must be from a financial institution. Before applying for a loan, ensure that you pay all the outstanding balance on any other loans.

Many, if not all, of the financial institution offer some sort of stand alone HELOC or couple it will other products that include a HELOC portion.

The best type of line of credit product for you will depend on whether you’re borrowing the maximum amount, how much available credit you have and whether you’re looking for a fixed interest rate or you’ll entertain variable interest rates.

A few offered by Canadian banks are as follows: TD Home Equity Flexline which uses a revolving credit. As you pay down your loan, you open up your available credit. This allows you to more immediately access cash and improves overall cash flow.

According to the TD Home Equity Flexline website, there are many HELOC advantages including a variable interest rate based on current market conditions. This allows for a potential lower interest rate on the home equity line.

The Tangerine Home Equity Line offers a fixed payback plan and allows you to payback the home equity line of credit anytime including a lump sum payment. Many customers find the Tangerine HELOC rates to be significant savings over regular mortgage payments, including a variable mortgage rate or fixed mortgage rates. This is one of the generally held HELOC advantages.

Total Debt Service Ratio

Whether we know it or not, everyone has a total debt service ratio (TDS). By paying down lending on your personal finance side greater than the monthly interest payments, you’ll open up the credit portion of you TDS. This may not guarantee you get the prime lending rate, but likely much better interest rates. Other factors like consolidating debt or previous bankruptcy may impact loan eligibility and amount.

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Good TDS Equals More HELOC funds available.

The higher your home equity, otherwise known as the market value of the home, the easier the loan process is for equity line of credit loans. This, combined with a good credit score and a well-balance total debt service ratio may lead to earning a low interest loan.

Your equity may increase over time as you repay your debts. This includes your line of credit so no missing payments!

Ensure that you’re making regular payments, and try to avoid paying only the minimum payment as this is really payment covers only interest.

Paying the Maximum to Get the Most Out of Your Home Equity Line of Credit

Ideally, pay the maximum amount to see the principle decrease. Interest only minimum payments on personal loans or other loans, will also tie up your borrowing power because you’ve maximized your credit limit.

You may also increase by having a home appraisal done again. Since how much equity you can leverage depends on the valuation, did you know you can dispute your the home appraisal?

Paying the Maximum to Get the Most Out of Your Home Equity Line of Credit


How Much Can I Leverage for an Equity Line of Credit?

In some instances, home equity line of credit can be up to 60% of a home’s assessed value based on a federal financial transaction. Or the balance remaining of a homeowner’s loan could equal 80% or less of the value. Interest rates vary depending on prime rates increasing and falling.

Types of Home Equity Lines of Credit

It is common to use a home equity line of credit for a mortgage or standalone mortgage as a combination. Neither a line of credit nor a standard mortgage eliminates the need for a down payment. A word to the wise: the bigger the downpayment, the better!

Apply for a Home Equity Loan

The application process is only one time. If approved, you may get a home equity credit line at any time. You must pass an “express test” before your lender can approve you for an equity loan or home equity line of credit. Generally, you must show the willingness to pay a qualifying rate that is usually higher than both market value and what you actually pay. This stress tests should be completed even if there is no insurance. Speaking of insurance, you should build the cost of insurance coverage and legal fees above mortgage payments of HELOC payments into your budget.

Understand Your Home Equity Line of Credit Contract

Search the web for mortgage loans and home equity lines understand the product offers out there to get your home secured.

Each mortgage loan or home equity line of credit may contain various terms & conditions so read the fine print very closely. A home equity line of credit is a lot of money, so be sure you know what you’re getting yourself or your family into.

Get in touch with your lender to ask questions and see if they’re willing to match the credit limit or the interest rate of one of their competitors.

What is the Interest Rate on a HELOC?

Home Equity line of credit loans offer variable rates. This means that your HELOC interest rate may change with the bank or financial institution’s interest rate changes.

Lenders base their interest rate upon the Prime Rate offered by the Bank of Canada. Interest rates on HELOCs vary according to prime rates from the lender plus or minus a certain amount of interest. Similarly, there might be HELOC rate quotations of prime + 0.5%. If you are able to pay HELOC lenders prime interest rate at 2.25%, you will have 2.84% of your loan balance.

Best HELOC Rates in Canada

HELOC is a line of credit style of loan for borrowers who want to use a loan to get more equity and thus a higher credit limit. The flexibility and low rates on unsecured mortgage credit cards are available on a standard line. Generally, interest is much lower than in unsecured alternative loans.

How Do I Borrow From a Home Equity Loan?

You have a right to withdraw money to a HELOC if your credit limit is not over the threshold set for of your account. The use of borrowed money within your credit limit is totally your choice.

Many people have used their line of credit for renovations or for vacation purposes. The withdrawal of unsecured equity loans within your credit limit is easy. Many lenders will let people who are in making regular payments in excess of the minimum interest payments withdraw money straight into their HELOC. Some of those also offer direct credit checks against home equity credit.

If you do online banking, you may also send bills or transfer money from one account to another.

How Do I Borrow From a Home Equity Loan


How do I Qualify For a Home Equity Loan?

Most major Canadian banks also offer home equity financing. Generally speaking, the rules require 80% of the house to get a housing loan before it’s granted a HELOC. Once your 20% equity requirement is met, lenders will assess your credit history, the market value of your home and your income stability before approving your loan.

How Much Can I Borrow From a Home Equity Loan?

If you have 20% equity on your home, you may be eligible for credit up to 65 % of its appraisal or market value.

Make a Plan to Use Your Home Equity Line of Credit

Create the proper method to use your equity loan and get it. Think of a repayment timeline that allows not only for interest only payments but also for additional monthly payments. Make an appropriate budget for your project and ensure you include your down payment.

You can borrow 65% of the purchase price of your home through the Home Equity Loan Program.

It is not necessary to borrow everything. Using less credit cards can help reduce creditor debt.

Substitute for a Mortgage

A standalone home equity loan could substitute mortgages as a substitute. It is possible to borrow for the purchase and sale of a residence.

Using unsecured credit lines to get home equity rather than conventional mortgages offers more flexibility than unsecured loans do.

If you wish you can pay back your loan anytime, you can choose the amount that will be paid. You may even pay your entire balance back at any time without repayment penalties. This, along with the higher mortgage rates tends to be a heavily-favored positive of HELOC over a traditional mortgage loan.

Can I Buy a Home using a Home Equity Line of Credit and a Mortgage?

Occasionally borrowers may purchase their own houses with home equity or a bank-backed mortgage combination. These are sometimes called a readvanceable mortgage. With this option a buyer can purchase a house via a revolving loan or a fixed loan.

With a line of credit the borrower pays back the principal whenever it desired, provided the minimum rate is met monthly. The loan will repay as a fixed-term loan in its amortization period.

For purchasing a home using HELOCs with mortgages together, you will have a 20 percent down payment.

Home Equity Line of Credit Combined with a Mortgage

Many banks have a home equity loan combined with a mortgage under their own name. Generally referred to as an adjustable loan. This product includes revolving home equity loans as well as a fixed term mortgage. In some cases you don’t have an annual repayment plan.

Your bank usually requires you to pay a fixed rate interest on your loan. Term mortgages usually require periods of amortization. Payment of mortgage principal and interest is made at regular intervals.

Buying a Home With a Home Equity Line of Credit Combined with a Mortgage

Your home purchases may include a home equity loan and a fixed term mortgage. It is up to your lender to use both of these parts of your loan for financing your house.

You need 20% loan and 20% equity. It’s best to pay for more money or more equity in a home loan by using a simple loan to pay for the home. Home equity loans are a good option.

If your home is purchased in full the loan amount is not more than 45% of the purchase price, but the amount is refundable. You may finance an investment of at least 80 percent of its purchase price and the rest will be paid on fixed term loans.

Buying a Home With a Home Equity Line of Credit Combined with a Mortgage


Creating Sub-accounts in a Home Equity Line of Credit Combined With a Mortgage

Home equity credit in conjunction with a mortgage could include other forms of credit and banking services within a single limit.You can set these loans and credit products in sub-accounts within your home equity line of credit.

A variety of loan or credit options may have different terms depending on your personal equity credit including if you have an existing mortgage, done a consumer proposal or a debt consolidation.

You may also borrow money from an equity loan in order to repay the loans you’re owed by others.

It’s important to be careful when using home equity loans along with mortgage loans so that no credit card charges become a burden.

An Additional Note About Home Equity Loans

Home equity loans and credit lines differ. In home equity loans the payment will come once. The cost of an estate can exceed the value of the entire property. The total balance of your debt is paid in interest. This money is not reversible. Your payments have to be made on fixed periods and on an annual basis. You will pay interest on the balance and capital. Find out the best way to borrow from home equity.

Stand-alone Home Equity Loan

A home equity loan is a revolving loan guaranteed by the home owner. This is in no relation to your mortgage. Maximum credit limit to buy a home equity loan.

How to Pay Off a Mortgage Using a HELOC?

If a person wants to borrow money from his or her home it should be noted that they may have HELOC for their debts. You could replace the mortgage balance with a HELOC.

Buying a house with a HELOC can be easy, and the HELOC process is also a simple step in the process. Your loan can then be transferred to a HELOC.

If you pay back the loan on a prematurely you will face penalties for it. When you use HELOCs to pay the mortgages, you are likely to pay off a much greater mortgage balance. I want to know what kind of loan you can take?

How Do I Pay Back a Home Equity Line of Credit?

The payback period does not apply to home loans. The loan will be paid in full.

The interest you pay monthly for the loan if you pay off an outstanding loan is a lower amount than a loan. If the money has been wiped from your account, it does not incur interest.

Fixed Monthly Lenders’ Fees

Some lenders charge a fixed monthly fee regardless if you have an equity loan. If your HELOC opens you should discuss the possibility of additional charges with your lender.

HELOC for Canadian Retirees

What is a HELOC and is it worth considering whether it would work as a housing plan for retired home owners? Some retiree households do not qualify for a HELOC if they do not have enough cash in their pocket. Similarly, retirees could lose their homes based on their bank’s view that they could be considered credit riskier. It’s for this reason that some seniors elect for reverse mortgages.

With loans or lines of credit, like many other things, you get what you pay for. Do your research to familiarize yourself with the process and to understand what products are available to you. Before considering making any credit requests, speak to a trusted lender about improving your wealth health.

About the Author

Heather McDowell is a mother and a REALTOR®. Heather has spent most of her real estate career selling residential real estate, and its leasing and has dealt with the additional complexities of the cottage, timeshare and rural properties, and condominiums. She has dabbled in new construction and is expanding her portfolio to include commercial sales and leasing. Heather is also a dedicated volunteer for both the local women’s shelter and a national hospice organization and is an emerging playwright. Heather describes her focus as diversifying real estate content that not only addresses national matters but explores those issues unique to each province and territory. You can contact Heather at or find her on socials at: Facebook – LinkedIn – Instagram –  

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