Mortgage Amount If you are a first-time homebuyer, the mortgage amount is the price of the home you intend to purchase, minus your down payment. If you are renewing or refinancing your mortgage, this is the value of your the mortgage.
       Term The mortgage term is the amount of time a home buyer commits to the rules, conditions and interest rate agreed upon with the lender. The term can be anywhere from six months to 10 years, with a 5-year mortgage term being the most common duration.
       Amortization The amortization period is the length of time it takes to pay off your mortgage in its entirety. The most common amortization period is 25 years, with the maximum set at 30 years for down payments less than 20%. Although longer amortization periods reduce your monthly payments, you will pay more interest over the life of your mortgage.

HELOC Mortgage Rates

Mortgage rate
       Mortgage rate The rate of interest you will pay on the outstanding balance of your mortgage. This rate can be fixed for the duration of the term or variable, fluctuating with the prime rate. Fixed rates are most popular in Canada and represent 66% of all mortgages.
Provider
       Provider Mortgage providers include lenders and mortgage brokers. As the name suggests, lenders provide the funding for your mortgage. Mortgage brokers are licensed professionals with access to multiple lenders and products. According to the Canadian Mortgage and Housing Corporation, mortgage brokers accounted for 38% of mortgage originations in 2009.
Rate hold
       Rate hold The rate hold is the time period, between 30-120 days, before your mortgage renewal date you are able to lock in the current mortgage rate. If rates go down further within this period, however, many lenders will honour the lower rate.
Prepayment
       Prepayment Prepayment options outline the flexibility you have to increase your monthly mortgage payments or make a lump sum outlay against your mortgage as a whole. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), 28% of mortgage holders used one or both prepayment privileges in 2010.
Payment
       Payment The monthly mortgage payment is calculated based on the mortgage amount, amortization period and the associated mortgage rate. A general affordability rule is that your monthly housing costs should not exceed 32% of your gross household monthly income.
3.50%
Prime + 0.50
True North Mortgage
True North Mortgage
120 days Lump Sum: 100%
Monthly: 100%
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3.50%
Prime + 0.50
Laurentian
Laurentian
90 days Lump Sum: 100%
Monthly: 0%
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3.50%
Prime + 0.50
RedPath Financial
RedPath Financial
120 days Lump Sum: 100%
Monthly: 100%
$-
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3.50%
Prime + 0.50
Safebridge
Safebridge
90 days Lump Sum: 100%
Monthly: 100%
$-
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3.50%
Prime + 0.50
MCAP
MCAP
120 days Lump Sum: 20%
Monthly: 20%
$-
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3.65%
Prime + 0.65
ING Direct
ING Direct
30 days Lump Sum: 100%
Monthly: 0%
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4.00%
Prime + 1.00
National Bank
National Bank
90 days Lump Sum: 100%
Monthly: 0%
$-
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Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is a revolving line of credit that allows you to borrow the equity in your home at a much lower interest rate than a traditional line of credit. Home equity is the current market value of your home minus the remaining balance of your mortgage. Essentially, it's the amount of ownership of a property you have built up through both appreciation as well as reductions in the mortgage principle made through your mortgage payments. So, as you pay off your mortgage and build equity in your home, a HELOC gives you the ability to reborrow a portion of these funds. You can use HELOC funds at your discretion for renovations, debt consolidation, higher education or anything else you need. Just remember that the HELOC is secured by your home and cannot exceed 65% of your home's value.

With a HELOC mortgage, the entire line of credit available is not advanced upfront. Rather, you have the freedom to use as much or as little of the HELOC as you choose, and you only pay interest on the amount you have withdrawn. Interest is calculated daily at a variable rate attached to Prime, however, HELOC rates are often higher than variable mortgage rates and the relationship to Prime can technically change anytime at the disrection of your lender. For example, a variable mortgage rate is often Prime +/- a number, like Prime – 0.35%. HELOC rates, however, are set at Prime + a number and your lender can technically change that number anytime.

Calculating a Home Equity Line of Credit (HELOC)

As per the Office of the Superintendent of Financial Institutions (OSFI), a HELOC can give you access to no more than 65% of the value of your home. It's also important to remember that your mortgage loan balance + your HELOC cannot equal more than 80% of your home's value. To see how this works, let's look at an example:

The value of your home = $350,000
Your outstanding mortgage balance = $175,000

The maximum loan-to-value ratio is 80%:

$350,000 x 80% = $280,000

Then, you must subtract the balance of your mortgage to get the total allowable HELOC amount:

$280,000 – $175,000 = $105,000

The maximum amount of equity you could pull from your home through a HELOC is $105,000.

Now, you still need to make sure that $105,000 doesn't exceed 65% of your home's value. To be sure, simply divide the HELOC amount by the value of your home:

$105,000 / $350,000 = 30%

In this example, you could access $105,000 through a HELOC, which only amounts to 30% of your home's value.

Comparing HELOC Products

Compare the different bank HELOC products in the chart below to find the one that meets your needs.

HELOC Minimum amount Maximum amount (line of credit portion) Sub-divide lines Option to convert to fixed Revolving /re-advancable
balance
Monthly fee Second position
BMO Homeowner ReadiLine None 65% market value No No Yes No No
CIBC Home Power $10,000 65% market value No No Yes No No
Desjardins Versatile Line of Credit $25,000 65% market value No No Yes No No
ING DIRECT Canada HELOC $15,000 or $50,0002 65% market value No Yes No No No
Manulife One $50,000 65% market value 15 Yes Yes Yes Yes
National Bank All-in-One $25,000 65% market value 99 Yes Yes No No
PC Financial Secured Borrowing Account $15,000 65% market value No No Yes No No
RBC Homeline Plan $5,000 65% market value 5 Yes Yes No No
Scotiabank STEP None 65% market value No No Yes No No
TD Canada Trust HELOC $10,000 65% of market value
or purchase price1
20 Yes Yes No Yes

1 65% of market value or purchase price, whichever is lower.

2 Minimum HELOC value of $15,000 if customer also has an ING mortgage. If customer is applying for a HELOC only, the minimum amount is $50,000.

HELOC Features

Minimum and maximum amounts

The minimum amount of a HELOC varies from bank-to-bank, with some institutions not offering the product at all. The maximum HELOC amount is calculated as 65% loan-to-value of your home, as seen in the example calculation above.

Revolving balance

HELOCs are described as having a revolving balance, because borrowing multiple times within the account for any amount up to the allowable credit limit does not require writing a new loan document. The credit limit can also be increased as the equity in your home grows.

Sub-divide lines

It is sometimes possible to divide up your HELOC into smaller portions through different sub-accounts. An example of where this may be used is if you wanted to draw out equity to invest in the stock market. In this case, the interest you pay on borrowed money is tax deductible. So having a separate account makes it easier to track the money.

Option to convert to fixed

You can sometimes convert a portion of your outstanding borrowed HELOC funds to a fixed rate, which you will then pay like a standard mortgage.

Second position HELOC

This means that you can hold your mortgage with one bank and get a HELOC with another bank. A HELOC is not necessarily a “second mortgage". A "first" or "second" mortgage is used to refer to the loan's claim position. A HELOC is often second position because there is another mortgage on the property at the time. However, it is possible to have a HELOC in first position. HELOCs usually have higher interest rates because it is assumed that they will be in second position and, as a result, are riskier to the lender. In the case of you defaulting, the lender in second position is not repaid until the first position lender is.