What is a HELOC in Canada?

A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by your home. Borrowers can draw up to the credit limit, repay, and borrow again during the draw period. OSFI Guideline B-20 caps Canadian HELOCs at 65% of the home's appraised value. Combined with the first mortgage, total borrowing cannot exceed 80% of appraised value under OSFI rules.

How is HELOC interest calculated in Canada?

HELOC interest accrues daily on the outstanding balance. Monthly interest = balance x (annual rate / 365) x days in the month. Because the rate is variable and tied to the lender's prime rate, payments fluctuate with Bank of Canada policy rate changes. Most HELOCs are interest-only during the draw period, though some lenders require minimum principal payments.

What is the maximum HELOC limit in Canada?

Under OSFI Guideline B-20, the standalone HELOC limit is 65% of the home's appraised or purchase value (whichever is lower at origination). If combined with a first mortgage (readvanceable mortgage), the total credit facility cannot exceed 80% LTV. For a home appraised at $800,000, the maximum HELOC would be $520,000 (65% x $800,000), assuming no first mortgage balance.

What is the current HELOC prime rate in Canada?

Major Canadian bank prime rates follow the Bank of Canada policy rate with a spread of approximately 220 basis points. As of early 2026, the Bank of Canada policy rate is in the 3% range; bank prime rates are therefore near 5.2%. HELOC rates are typically prime plus 0.5% to 1.0%, placing them in the 5.7% to 6.2% range. Rates vary by lender and borrower profile.

Is HELOC interest tax deductible in Canada?

HELOC interest is deductible if and only if the borrowed funds are used to earn income from a business or property (ITA s.20(1)(c)). Drawing on a HELOC to invest in a taxable account (e.g., stocks in a non-registered account) makes the interest deductible. Drawing for personal use (home renovation, vacation, debt consolidation for personal debts) does not produce a deduction. A rental property down payment financed by HELOC would make that portion deductible.

Can I use a HELOC as an emergency fund?

A HELOC can serve as a backup source of liquidity but carries risks not present in a cash emergency fund: the lender can freeze or reduce the limit if your home's value drops or your financial situation changes; variable rates mean interest costs rise with the policy rate; and draws reduce home equity. Financial planners generally recommend a separate liquid emergency fund before relying on HELOC access.

What happens to my HELOC if I sell my house in Canada?

The HELOC balance must be repaid in full on closing of the home sale. The outstanding HELOC balance is deducted from the sale proceeds along with any first mortgage balance. If total borrowing exceeds the net sale proceeds (after real estate commission and closing costs), the seller must pay the shortfall from other funds.

Can I get a HELOC if I have a high-ratio mortgage?

No. OSFI Guideline B-20 prohibits HELOCs on properties with mortgage insurance (high-ratio mortgages, i.e., those with less than 20% down payment). A HELOC can only be added once the owner holds at least 20% equity and the mortgage is conventional (uninsured).

How does a readvanceable mortgage work in Canada?

A readvanceable mortgage combines a fixed amortising mortgage with a revolving HELOC. As the mortgage principal is repaid each month, the HELOC room increases by the same amount. The combined facility is capped at 80% LTV. Products like the BMO Homeowner ReadiLine, RBC Homeline Plan, and TD Home Equity FlexLine operate this way.

Are there fees to open a HELOC in Canada?

Common HELOC fees include a legal/notarial fee to register the collateral mortgage ($500 to $1,500), an appraisal fee ($300 to $600), and sometimes a setup or administration fee ($100 to $350). Some lenders waive these costs for existing mortgage customers transferring to a HELOC product. Annual fees and inactivity fees vary by lender.

Canadian HELOC Calculator

Compare HELOC interest-only minimum payments with a targeted payoff schedule. See the true cost of carrying a Home Equity Line of Credit.

Reviewed by Canadian Money Help Editorial Updated April 24, 2026 Source OSFI Guideline B-20

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A Home Equity Line of Credit (HELOC) calculator determines how much you can borrow against your home’s equity and what the monthly interest cost will be on a given balance. Canadian HELOCs are governed by OSFI Guideline B-20, which caps HELOC borrowing at 65% of the home’s appraised value, with total mortgage-plus-HELOC debt capped at 80% loan-to-value (LTV).

HELOC Limit Calculation

Maximum HELOC = (Home Value × 65%) or (Home Value × 80% − Mortgage Balance), subject to the lower result. For a home worth $700,000 with a $350,000 mortgage balance: 65% limit = $455,000; 80% LTV limit = $560,000 − $350,000 = $210,000. The HELOC is capped at $210,000 in this case.

Interest Calculation

HELOC interest accrues daily on the outstanding balance. Monthly interest = balance × (annual rate / 365) × days in the month. On a $100,000 balance at 6.2% APR, monthly interest is approximately $510. Because the rate is variable, this amount changes whenever the lender adjusts its prime rate following a Bank of Canada rate decision.

OSFI Guideline B-20 Rules

OSFI Guideline B-20 (effective January 2018, updated October 2017 and March 2023) establishes two key constraints for HELOCs at federally regulated lenders:

The HELOC portion of any mortgage product cannot exceed 65% of the property’s appraised value.
The total of all borrowing secured by the property (mortgage plus HELOC) cannot exceed 80% LTV.
HELOCs cannot be used as down payment for the same property.
Mortgage insurance (CMHC, Sagen, or Canada Guaranty) is not available on HELOC products.

Tax Deductibility

HELOC interest is deductible under ITA s.20(1)(c) only when the drawn funds are directly used to earn income from a business or property. Draws for personal use (home renovation, vehicle purchase, travel) are not deductible. The CRA requires clear tracing of borrowed funds to the qualifying income-earning use.

The Smith Manoeuvre is a Canadian strategy that uses HELOC proceeds to invest in non-registered accounts, converting non-deductible mortgage interest into deductible investment loan interest over time. The CRA has confirmed this strategy is legal if properly structured, but execution errors can disallow the deduction.

Risk Factors

HELOCs carry variable interest rate risk. The Bank of Canada raised the policy rate from 0.25% in March 2022 to 5.00% by July 2023, increasing HELOC interest costs by approximately 475 basis points on outstanding balances within 16 months. Borrowers with large HELOC balances saw monthly interest costs more than double in that period. Rate decreases in 2024 and 2025 partially reversed this impact.

Lenders can reduce or freeze a HELOC if the home’s value declines significantly or if the borrower’s financial situation deteriorates. Unlike a mortgage with a fixed amortisation, a HELOC balance can grow indefinitely if only interest is paid.

Source

OSFI Guideline B-20 (Residential Mortgage Underwriting Practices and Procedures); ITA s.20(1)(c); Financial Consumer Agency of Canada HELOC information; Bank of Canada policy rate history.

Frequently asked questions

What is a HELOC in Canada?: A Home Equity Line of Credit (HELOC) is a revolving line of credit secured by your home. Borrowers can draw up to the credit limit, repay, and borrow again during the draw period. OSFI Guideline B-20 caps Canadian HELOCs at 65% of the home's appraised value. Combined with the first mortgage, total borrowing cannot exceed 80% of appraised value under OSFI rules.
How is HELOC interest calculated in Canada?: HELOC interest accrues daily on the outstanding balance. Monthly interest = balance x (annual rate / 365) x days in the month. Because the rate is variable and tied to the lender's prime rate, payments fluctuate with Bank of Canada policy rate changes. Most HELOCs are interest-only during the draw period, though some lenders require minimum principal payments.
What is the maximum HELOC limit in Canada?: Under OSFI Guideline B-20, the standalone HELOC limit is 65% of the home's appraised or purchase value (whichever is lower at origination). If combined with a first mortgage (readvanceable mortgage), the total credit facility cannot exceed 80% LTV. For a home appraised at $800,000, the maximum HELOC would be $520,000 (65% x $800,000), assuming no first mortgage balance.
What is the current HELOC prime rate in Canada?: Major Canadian bank prime rates follow the Bank of Canada policy rate with a spread of approximately 220 basis points. As of early 2026, the Bank of Canada policy rate is in the 3% range; bank prime rates are therefore near 5.2%. HELOC rates are typically prime plus 0.5% to 1.0%, placing them in the 5.7% to 6.2% range. Rates vary by lender and borrower profile.
Is HELOC interest tax deductible in Canada?: HELOC interest is deductible if and only if the borrowed funds are used to earn income from a business or property (ITA s.20(1)(c)). Drawing on a HELOC to invest in a taxable account (e.g., stocks in a non-registered account) makes the interest deductible. Drawing for personal use (home renovation, vacation, debt consolidation for personal debts) does not produce a deduction. A rental property down payment financed by HELOC would make that portion deductible.
Can I use a HELOC as an emergency fund?: A HELOC can serve as a backup source of liquidity but carries risks not present in a cash emergency fund: the lender can freeze or reduce the limit if your home's value drops or your financial situation changes; variable rates mean interest costs rise with the policy rate; and draws reduce home equity. Financial planners generally recommend a separate liquid emergency fund before relying on HELOC access.
What happens to my HELOC if I sell my house in Canada?: The HELOC balance must be repaid in full on closing of the home sale. The outstanding HELOC balance is deducted from the sale proceeds along with any first mortgage balance. If total borrowing exceeds the net sale proceeds (after real estate commission and closing costs), the seller must pay the shortfall from other funds.
Can I get a HELOC if I have a high-ratio mortgage?: No. OSFI Guideline B-20 prohibits HELOCs on properties with mortgage insurance (high-ratio mortgages, i.e., those with less than 20% down payment). A HELOC can only be added once the owner holds at least 20% equity and the mortgage is conventional (uninsured).
How does a readvanceable mortgage work in Canada?: A readvanceable mortgage combines a fixed amortising mortgage with a revolving HELOC. As the mortgage principal is repaid each month, the HELOC room increases by the same amount. The combined facility is capped at 80% LTV. Products like the BMO Homeowner ReadiLine, RBC Homeline Plan, and TD Home Equity FlexLine operate this way.
Are there fees to open a HELOC in Canada?: Common HELOC fees include a legal/notarial fee to register the collateral mortgage ($500 to $1,500), an appraisal fee ($300 to $600), and sometimes a setup or administration fee ($100 to $350). Some lenders waive these costs for existing mortgage customers transferring to a HELOC product. Annual fees and inactivity fees vary by lender.

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Methodology

HELOC limit = min(home value x 65%, home value x 80% - mortgage balance). Monthly interest = balance x (rate/365) x days.