Home Equity Line of Credit

A HELOC lets you borrow against the equity in your home as a revolving line of credit. You're approved for a maximum amount (capped at 65% of home value for a stand-alone HELOC, or 80% combined with a mortgage); you draw what you need, pay it down, draw again, and so on. Interest accrues only on the balance you've drawn. Most HELOCs are interest-only payment products at prime plus 0.50% to prime plus 1.00%. You can pay down principal any time without penalty, but you're not required to until the term ends or the lender calls the line. HELOCs are flexible but expensive over time. Because they're at prime-plus rates, the lifetime cost is materially higher than a fixed mortgage. They're best used as bridge financing (between selling and buying), short-term renovation funding, or as a flexible emergency cushion — not as a long-term debt. The OSFI stress test applies to HELOC qualification too.