Canadian homeowners have built up significant equity over the past decade, and many are looking at how to put it to work â for renovations, debt consolidation, investments, or major purchases. Two of the most common options are a HELOC (Home Equity Line of Credit) and a mortgage refinance. They're both ways to access your equity, but they work very differently and suit different situations. Here's how to choose.
Use our mortgage calculator to model your current payments and see how refinancing at a different rate or term would change your monthly cost and total interest.
HELOC vs refinance: how each works
đĻ HELOC
- Revolving credit line â draw and repay as needed
- Variable rate (typically prime + 0.5%)
- Maximum 65% of home value (standalone)
- Interest-only payments on drawn amount
- Low setup costs; reusable after repayment
- Can be added alongside existing mortgage
- No fixed repayment schedule for principal
đ Mortgage Refinance
- Lump sum â borrow a fixed amount upfront
- Fixed or variable rate available
- Maximum 80% of home value total
- Fixed principal + interest payments
- Legal and appraisal costs ($1,500â$3,000+)
- Replaces or restarts your mortgage
- Predictable payoff schedule
The rate difference in 2026
HELOCs are almost always variable rate, priced at prime + a small spread (typically prime + 0.5%). With the Bank of Canada's prime rate in 2026, that puts most HELOC rates in the 5.5â6.5% range. Refinanced mortgage rates can be locked in at fixed rates in the 4.5â5.5% range for a 5-year term, depending on current bond yields and lender pricing.
In a falling or low rate environment, HELOC rates can be competitive with fixed refinance rates. In a rising rate environment, the variable HELOC rate can climb while a fixed refinance rate stays locked.
The maximum equity you can access
| Home Value | HELOC Maximum (standalone) | Refinance Maximum (80% LTV) |
|---|---|---|
| $500,000 | $325,000 (minus mortgage balance) | $400,000 total |
| $700,000 | $455,000 (minus mortgage balance) | $560,000 total |
| $1,000,000 | $650,000 (minus mortgage balance) | $800,000 total |
In practice, a HELOC combined with a mortgage cannot exceed 80% of the home's value either â the 65% is the HELOC's standalone limit when no mortgage exists. Most Canadians use a combined structure ("readvanceable mortgage") where the mortgage principal portion and HELOC together stay within the 80% limit.
When a HELOC makes more sense
Ongoing or staged expenses
A kitchen renovation that unfolds over 8 months is a perfect HELOC use case. You draw what you need as you need it and pay interest only on the outstanding balance. A lump-sum refinance would have you paying interest on $100,000 even if you've only spent $30,000 so far.
Emergency reserve
Many financially savvy Canadians maintain a HELOC as a backstop emergency fund â it's there if needed but costs nothing if unused. This is especially effective when combined with investing cash that would otherwise sit in a savings account.
You're already in a variable rate environment
If you expect rates to hold or fall, the HELOC's variable rate may not be a concern â and you avoid the break penalty that comes with refinancing a fixed mortgage mid-term.
When a mortgage refinance makes more sense
Large lump-sum need
If you need $150,000 for a major renovation, purchase, or investment, a refinance at a lower fixed rate often beats a HELOC's variable rate for a large, defined amount you intend to pay off over years.
Consolidating high-interest debt permanently
Rolling credit card debt or a car loan into a refinanced mortgage at 5% vs. 20% saves significant interest â but only if you don't accumulate the credit card debt again. A refinance's fixed amortization forces a payoff schedule in a way a HELOC does not.
You want payment certainty
A refinanced mortgage with a fixed rate and set amortization gives you complete payment predictability. A HELOC's interest-only minimums and variable rate mean your cost can fluctuate and there's no built-in principal paydown unless you make it.
The costs of each option
| Cost | HELOC | Refinance |
|---|---|---|
| Legal/notary fees | $500â$1,500 | $1,000â$2,000 |
| Appraisal | $300â$500 | $300â$500 |
| Mortgage break penalty | N/A (add-on to existing) | Could be $0â$30,000+ |
| Annual fee | $0â$100 | None |
| Typical total upfront cost | $800â$2,000 | $1,500â$35,000+ |
The mortgage break penalty is the wildcard. If you're mid-term on a fixed mortgage and need to refinance, the Interest Rate Differential (IRD) penalty can be enormous â sometimes $20,000â$40,000. This is often the deciding factor: accessing equity via a HELOC at renewal vs. breaking a fixed mortgage early to refinance.
See how much your mortgage currently costs
Run your current mortgage through our calculator to see total interest remaining and how a rate change at refinance would affect your long-term cost.
â Model My MortgageFrequently asked questions
What is a HELOC in Canada?
A HELOC (Home Equity Line of Credit) is a revolving credit facility secured against your home. Unlike a mortgage, you don't receive a lump sum â you draw funds as needed up to your approved limit and pay interest only on what you've borrowed. It's similar to a credit card, but secured by your home and at a much lower rate. In Canada, a standalone HELOC can be up to 65% of your home's value.
What is the maximum HELOC amount in Canada?
A standalone HELOC can be up to 65% of your home's appraised value. When combined with a mortgage, total secured borrowing (mortgage + HELOC) cannot exceed 80% of the home's value. On a $700,000 home with a $300,000 mortgage balance, the maximum HELOC is $260,000 ($560,000 total limit minus $300,000 mortgage).
Will refinancing my mortgage affect my credit score?
Refinancing involves a hard credit inquiry, which temporarily lowers your score by a few points. The refinance itself doesn't significantly impact your score long-term. Opening a HELOC also involves a hard inquiry. Neither has a lasting negative effect for borrowers with good credit who continue making payments on time.
Can I have both a mortgage and a HELOC in Canada?
Yes â many Canadians use a "readvanceable mortgage" structure, which combines a traditional mortgage with a HELOC. As you pay down the mortgage principal, that amount becomes available as HELOC room. This is offered by most major lenders and is one of the most flexible structures for homeowners who want access to equity without refinancing every time.