This Home Equity Line of Credit (HELOC) calculator helps estimate how much you can borrow by utilizing the equity that you have in your home in Canada. A HELOC is a flexible line of credit that you can set up to have available when you need it.
What is a Home Equity Line of Credit (HELOC)?
A Home Equity Line of Credit is a type of loan which is secured against the equity the borrower has in their home. With a HELOC, the lender will agree to lend you an amount based on the loan-to-value of your home. If you are looking to get a HELOC, you should know the difference between the draw period and the repayment period.
Draw Period: This refers to the amount of time where you are eligible to withdraw funds from the HELOC. During this period, you are only responsible for making interest payments on the amount of money that you have drawn from the HELOC.
Repayment Period: This refers to the end of your draw period. At this time, you must start to repay the outstanding balance of the amount borrowed. Payments will often be higher during this period, as you will be paying back both interest and principal.
A HELOC can be a good way to secure a loan to finance larger purchases such as home renovations or purchasing a car. If you are able to secure a favourable rate on your HELOC, it may be wise to use it as a way to consolidate debt by paying off higher-interest debt such as credit cards first.
What is the monthly payment on a $100,000 home equity line of credit?
Let’s work through a detailed example to show how you can calculate your HELOC payment as well as how much your monthly payment would be on a $100K home equity line of credit.
Example: $100,000 HELOC at prime + 0.50%
Assuming the current prime rate is 5.95% and your HELOC rate is prime + 0.50% = 6.45%:
- Interest-only monthly payment: $100,000 × 6.45% ÷ 12 = $537.50/month
- This payment covers only the interest — the balance remains at $100,000
If you choose to make principal + interest payments over a 20-year repayment period:
- Monthly payment: approximately $740/month
- Total interest paid over 20 years: approximately $77,600
Making even small additional payments above the minimum interest-only amount can significantly reduce the total interest cost. Paying $700/month instead of $537.50 would pay off the $100,000 balance in approximately 22 years and save thousands in interest.
HELOC rates in Canada
HELOC interest rates in Canada are variable and tied to the lender’s prime rate. Most lenders offer HELOC rates at prime plus 0.50% to prime plus 1.00%, though borrowers with strong credit and significant equity may qualify for rates at or near prime.
HELOC rates at different prime rate scenarios
| Prime Rate | HELOC at Prime | HELOC at Prime + 0.50% | HELOC at Prime + 1.00% | Monthly Interest on $100K |
|---|---|---|---|---|
| 4.45% | 4.45% | 4.95% | 5.45% | $413 – $454 |
| 5.45% | 5.45% | 5.95% | 6.45% | $454 – $538 |
| 5.95% | 5.95% | 6.45% | 6.95% | $496 – $579 |
| 6.45% | 6.45% | 6.95% | 7.45% | $538 – $621 |
| 6.95% | 6.95% | 7.45% | 7.95% | $579 – $663 |
| 7.45% | 7.45% | 7.95% | 8.45% | $621 – $704 |
Since HELOC rates fluctuate with the Bank of Canada’s overnight rate, your monthly interest costs can change over time. When rates are low, a HELOC can be one of the most affordable ways to borrow. However, during periods of rising rates, your payments will increase, so it is important to budget for rate fluctuations.
HELOC vs. home equity loan
A HELOC and a home equity loan both allow you to borrow against the equity in your home, but they work quite differently.
| Feature | HELOC | Home Equity Loan |
|---|---|---|
| Interest rate | Variable (tied to prime) | Fixed |
| Access to funds | Revolving — borrow, repay, reborrow | One-time lump sum |
| Payment type | Interest-only during draw period | Fixed principal + interest |
| Payment predictability | Payments change with rates | Payments stay the same |
| Maximum LTV | 65% (standalone) | 80% (combined with mortgage) |
| Best for | Ongoing or variable expenses | Known one-time expenses |
| Flexibility | High | Low |
Choose a HELOC if you need ongoing access to funds, such as for home renovations over time or as an emergency fund. A home equity loan may be better if you need a specific amount and prefer the certainty of fixed payments. Use our mortgage calculator and loan-to-value calculator to understand how much equity you have available.
When to use a HELOC
A HELOC can be used for a variety of financial goals. Here are the most common situations where a HELOC makes sense:
Home renovations
Renovations are one of the most popular uses of a HELOC because the spending often happens over time rather than all at once. You only draw funds as work is done and pay interest only on the amounts you have used. This makes a HELOC more cost-effective than taking a full lump-sum loan upfront.
Investing (The Smith Manoeuvre)
Some Canadians use a HELOC to invest as part of a strategy known as the Smith Manoeuvre. The concept involves borrowing from your HELOC to invest in income-producing assets (such as dividend-paying stocks or rental properties). Because the borrowed funds are used for investment purposes, the interest on the HELOC becomes tax deductible. Over time, the investment returns and tax deductions can outweigh the interest costs. This is an advanced strategy that carries significant risk — consult a financial advisor and tax professional before pursuing it.
Emergency fund backup
A HELOC can serve as a financial safety net. Since you only pay interest when you actually draw on the line, keeping a HELOC available costs nothing until you use it. This can provide peace of mind knowing funds are accessible if unexpected expenses arise.
Education expenses
Some homeowners use a HELOC to fund post-secondary education for themselves or their children. HELOC rates are typically lower than student lines of credit, though the interest is not tax deductible when used for personal education.
Debt consolidation
If you have high-interest debt like credit cards (often 19.99%+), consolidating that debt with a HELOC at 6% to 7% can save significant interest. Use our debt payoff calculator to compare strategies.
Risks of HELOCs
While HELOCs offer flexibility, there are important risks to be aware of:
Interest rate risk
Because HELOC rates are variable, your costs can increase substantially when the Bank of Canada raises the overnight rate. On a $200,000 HELOC balance, a 2% rate increase means an additional $4,000 per year in interest costs ($333/month).
Over-borrowing
The revolving nature of a HELOC makes it easy to keep borrowing. Without a structured repayment plan, some borrowers find their balance growing rather than shrinking over time. Set a clear plan for repayment before drawing on your HELOC.
Impact on home equity
Borrowing against your home equity reduces your ownership stake. If property values decline while you have a large HELOC balance, you could end up with very little equity — or even negative equity — in your home.
Risk to your home
A HELOC is secured by your property. If you are unable to make payments, the lender has the right to take legal action that could ultimately result in the sale of your home.
Tax deductibility rules for HELOCs
In Canada, HELOC interest is only tax deductible if the borrowed funds are used for investment or business purposes that generate income. The rules are as follows:
- Tax deductible: HELOC funds invested in income-producing investments (stocks, bonds, rental property) or used for business purposes
- Not tax deductible: HELOC funds used for personal expenses (renovations, vacations, car purchases, education)
Proper documentation is essential. You must be able to demonstrate to the CRA that borrowed funds were used for eligible investment or business purposes. Keep your HELOC used for investing completely separate from any HELOC used for personal purposes to maintain clear records.
Related calculators
- Loan-to-Value Calculator — Determine how much equity is available in your home
- Mortgage Calculator — Calculate your regular mortgage payments
- Mortgage Insurance Calculator — Estimate CMHC insurance premiums
- Mortgage Refinance Calculator — Compare refinancing versus a HELOC
- Debt Payoff Calculator — Plan a strategy to pay off HELOC and other debt
- Investment Calculator — Model returns if investing HELOC funds
- Line of Credit Calculator — Compare unsecured line of credit options