For homeowners who want flexible credit

A HELOC gives you a flexible credit line secured by your home.

Borrow what you need, when you need it, and pay interest only on what you use. Here is how a home equity line of credit works and when it is a good fit.

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The short versionDocumentsYour options Mistakes to avoidFirst stepsWhat we will askFAQ
The short version

How lenders look at heloc borrowers

1A HELOC is a revolving credit line secured by your home, a bit like a credit card with a much higher limit and a lower rate.
2You can usually borrow up to 65 percent of your home value as a HELOC, and up to 80 percent when it is combined with your mortgage.
3Payments are often interest only on what you have drawn, and the rate is normally variable, so your cost moves with the lender prime rate.
4It suits ongoing or uncertain costs, like renovations paid in stages, but it needs discipline because you can keep borrowing.
Get ready

What lenders will ask you for

Photo ID
Mortgage statement and property tax bill
Proof of income: pay stubs and T4s, or 2 years of Notices of Assessment
Proof of home insurance
A recent appraisal or the lender will order one
Your options

Which kind of lender fits you

Option 1

Stand-alone HELOC

A credit line registered separately behind your mortgage. Simple, but it is usually limited to 65 percent of the home value.

Option 2

Readvanceable mortgage

A mortgage and HELOC together: as you pay down the mortgage, more credit becomes available, up to 80 percent in total.

Option 3

Private or B lender HELOC

For borrowers who do not fit a bank, such as self-employed or credit challenges. Higher rate and fees, often with a plan to move back to a bank.

Avoid these

Common mistakes

!Paying only the interest for years and never reducing the balance.
!Treating it as an everyday spending account.
!Forgetting the rate is variable and can rise.
!Not checking whether the credit line freezes or is recalled in a downturn. Read the terms.
Take action

Your first steps

1Decide how much credit you realistically need.
2Estimate your home value and mortgage balance to see your available room.
3Gather your income documents.
4Compare a bank HELOC with a broker-sourced one, including fees and the rate formula.
5Start the intake so a broker can check what you would qualify for.
The intake

What your application will ask

Your online application goes one topic at a time and saves every answer and document as you go, so you can stop and come back. It never runs a credit check, and a licensed mortgage professional reviews it and follows up.

For heloc borrowers

  1. How much credit would you like, and what would you use it for?
  2. What is your estimated home value and current mortgage balance?
  3. Which lender holds your mortgage, and when does it renew?
  4. Do you plan to borrow all at once or in stages?
  5. What is your approximate household income and how is it earned?
  6. What monthly debt payments do you have today?
  7. In the last 7 years, any bankruptcy, consumer proposal, collections, or missed mortgage payments?

Plus the basics everyone answers 13

  1. Your full name, email, mobile number and the best time to call.
  2. The city you live in, and whether you are a Canadian citizen, permanent resident, or other status.
  3. Are you applying alone or with someone else? If with someone, their name and how you are related.
  4. Your goal: buy, refinance, renew, take out equity, or consolidate debt?
  5. The property type (house, condo, multi-unit) and the city it is in.
  6. Will you live in it, rent it out, or both?
  7. The purchase price or estimated value, and your target closing or renewal date.
  8. Your down payment or available equity, and where it comes from (savings, RRSP/FHSA, a gift, sale of another property).
  9. Your approximate yearly household income before tax.
  10. Your monthly debt payments: car loans, credit cards, lines of credit, student loans, support payments.
  11. Your own estimate of your credit score: excellent, good, fair, poor, or not sure.
  12. In the last 7 years, any bankruptcy, consumer proposal, collections, or missed mortgage payments?
  13. May the broker contact you? (A credit check is only ever run later, with your separate written consent.)
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Answers

Questions people ask

How much can I borrow with a HELOC?

Up to 65 percent of your home value as the HELOC itself, and up to 80 percent when it is combined with your mortgage. Your income and credit decide the final amount.

Is a HELOC rate fixed or variable?

Normally variable, tied to the lender prime rate plus a premium. Some lenders let you lock part of the balance into a fixed rate.

How are HELOC payments calculated?

Most require interest only on the amount you have drawn, which keeps payments low, but you must pay down the balance yourself to reduce your debt.

Can I get a HELOC if I am self-employed?

Often yes, using your Notices of Assessment or a business-for-self program, though some banks are stricter and a broker can look for options.

What are the risks of a HELOC?

The rate can rise, the limit can be reduced, and because your home is the security, missing payments can put it at risk. Borrow only what you can repay.

Does starting the intake affect my credit?

No. The intake is just questions. A credit check is only done later, with your separate permission.

Other situations

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General information, not mortgage, legal or tax advice. Lender rules change and every application is reviewed on its own facts. Your application and documents are stored privately and go only to a licensed mortgage professional at Top Mortgages Inc; they are never sold, and no credit check is run without your separate written consent.