HELOC vs mortgage in Canada: pros, cons, limits, rates and costs
Quick summary
A HELOC is a credit line you can borrow from again and again. Its rate is variable. A mortgage or home equity loan gives you the money once, with a payment plan. Neither is better for everyone. The official limit for a HELOC is 65% of your home's value, and for a second mortgage it is 80% minus what you owe. Both put your home at risk. Put your own numbers into the HELOC vs mortgage calculator.
Checked November 9, 2026. Main source: FCAC: Borrowing against home equity (modified October 15, 2025, read November 9, 2026). See all 5 sources.
Key facts
- HELOC limit
- 65% of your home's appraised value
- Source: FCAC, Borrowing against home equity
- Second mortgage limit
- 80% of appraised value, minus your mortgage balance
- Source: FCAC, Borrowing against home equity
- HELOC rate
- Variable, changes with market rates
- Source: FCAC, Borrowing against home equity
HELOC vs mortgage side by side
| HELOC | Second mortgage or home equity loan | |
|---|---|---|
| How you get the money | As needed, up to your limit | One lump sum |
| Borrow again after repaying? | Yes | No (a home equity loan cannot be re-borrowed) |
| Limit | 65% of appraised value | 80% of appraised value (a second mortgage: minus your mortgage balance) |
| Rate | Variable, changes with market rates | Fixed or variable, generally higher than a first mortgage |
| Payments | Your lender may ask for interest only, or principal plus interest | Fixed payments of principal and interest (home equity loan) |
| Paying it off early | You can pay back some or all of it at any time | A penalty can apply if you pay off or break a mortgage before the end of the term |
Source: FCAC: Borrowing against home equity (modified October 15, 2025, read November 9, 2026). Source: FCAC: Home equity lines of credit (read November 2, 2026). Source: FCAC: Mortgage fees, prepayment penalties (modified October 15, 2025, read November 3, 2026).
HELOC: pros and cons
- Pro: you borrow only what you need, and you pay interest only on what you use.
- Pro: you can repay and borrow again up to your limit.
- Pro: you can pay back some or all of it at any time.
- Con: the rate is variable, so your payment can go up. Your lender can change your rate at any time.
- Con: interest-only payments never reduce the amount you owe.
- Con: easy access to money makes it easy to borrow more than you can repay.
- Con: your home is the security. You could lose it if you do not repay.
Source: FCAC: Home equity lines of credit (read November 2, 2026).
Mortgage or home equity loan: pros and cons
- Pro: with a fixed rate, FCAC says the rate stays the same for the whole term, so your payments stay the same.
- Pro: fixed payments of principal and interest pay the loan down on a schedule.
- Con: a fixed rate is usually higher than a variable rate.
- Con: you get the money once. A home equity loan cannot be re-borrowed.
- Con: a penalty can apply if you pay off, break or move your mortgage before the end of the term. FCAC says it is usually the higher of three months of interest or the interest rate differential.
- Con: your home is the security here too.
Source: FCAC: Interest on mortgages (modified February 23, 2024, read November 3, 2026). Source: FCAC: Mortgage fees, prepayment penalties (modified October 15, 2025, read November 3, 2026). Source: FCAC: Borrowing against home equity (modified October 15, 2025, read November 9, 2026).
HELOC vs mortgage rates
A HELOC rate is variable. FCAC says it is usually the lender's prime rate plus a set amount, for example prime plus 1%. Prime can move when the Bank of Canada changes its policy rate. On October 28, 2026, the Bank of Canada raised its policy rate by 0.25 points to 2.5%.
A mortgage rate can be fixed or variable. FCAC says a fixed rate stays the same for the term. It also says the rate on a second mortgage or home equity loan is generally higher than on a first mortgage.
We do not list lender rates here. They change often and differ by lender and by person. Ask your lender for today's rate, then put it into the calculator.
Source: FCAC: Borrowing against home equity (modified October 15, 2025, read November 9, 2026). Source: FCAC: Home equity lines of credit (read November 2, 2026). Source: FCAC: Interest on mortgages (modified February 23, 2024, read November 3, 2026). Source: Bank of Canada: policy rate press release of October 28, 2026 (read November 2, 2026).
Costs to ask about
- FCAC lists an appraisal, a title search, title insurance and legal fees.
- You may need a new mortgage loan insurance premium, and your lender may change the terms of your original mortgage.
- A HELOC can also have account fees. Ask what they are, and what it costs to close it.
Source: FCAC: Borrowing against home equity (modified October 15, 2025, read November 9, 2026). Source: FCAC: Home equity lines of credit (read November 2, 2026).
Which one may fit you?
Neither is better for everyone. These are the questions that decide it.
| If this sounds like you | This may fit |
|---|---|
| You need money over time, in pieces, and want to repay and borrow again | A HELOC |
| You need one amount for one purpose and want a payment plan | A second mortgage or home equity loan |
| You cannot handle a payment that rises if rates rise | A fixed-rate option |
| You are tempted to spend whatever is available | Think twice about a HELOC |
This table is our plain summary of the differences above, not advice. A lender, an accountant or a credit counsellor can look at your whole situation.
Line of credit vs mortgage
A HELOC is a line of credit that is secured by your home. A personal line of credit is a different product, and it can be unsecured. Our guides explain how each one works.
Try it with your numbers
Enter the amount and the rates your lender gave you. You will see the monthly payment and the total interest for each option, and what a 1 point rise does to a HELOC payment.
Questions people ask
Is a HELOC better than a mortgage?
Neither is better for everyone. A HELOC lets you borrow as you need and repay and borrow again, but its rate is variable. A mortgage or home equity loan gives you the money once and can have a fixed rate. Both use your home as security.
Is a HELOC cheaper than a mortgage?
It depends on the rates you are offered. FCAC says a second mortgage or home equity loan generally costs more than a first mortgage. A HELOC rate is variable, so it can change. Put your lender's rates into our calculator to compare.
How much can I borrow with a HELOC?
FCAC lists a HELOC limit of 65% of your home's appraised value. Your lender sets your exact limit.
How much can I borrow with a second mortgage?
FCAC lists 80% of the appraised value, minus your mortgage balance.
Is a HELOC rate fixed or variable?
Variable. FCAC says it changes with market rates, and it is usually the lender's prime rate plus a set amount.
Can I pay off a HELOC early?
FCAC says you can pay back some or all of a HELOC at any time. A mortgage can have a penalty if you pay it off or break it before the end of the term.
Can I use a HELOC to pay off my mortgage?
Some people do. It means a variable-rate credit line replaces a mortgage with set payments, and a HELOC with interest-only payments never lowers what you owe. Ask your lender about any penalty on your mortgage and check the rate and payment before you decide.
What are the risks?
Your home is the security. FCAC warns of serious consequences, like the foreclosure of your home, if you cannot repay. A HELOC rate can rise, and easy access to money makes it easy to borrow too much.
What is the difference between a line of credit and a mortgage?
A mortgage is a loan with a payment plan. A line of credit lets you borrow up to a limit, repay and borrow again. A HELOC is a line of credit secured by your home. A personal line of credit can be unsecured.