A home equity line of credit (HELOC) and a personal line of credit work the same way day to day: you’re approved for a limit, draw what you need, pay interest only on what you’ve drawn, and the room comes back as you repay. The difference is security. A HELOC is secured by your home; a personal line of credit is unsecured. That one difference drives the rest: the rate, the limit, the approval steps and what’s at risk. This page is part of WealthNorth’s refinancing and home equity guide.
Side-by-side comparison
Each row is from the Financial Consumer Agency of Canada’s (FCAC) pages on home equity lines of credit and lines of credit.
| Feature | HELOC | Personal (unsecured) line of credit |
|---|---|---|
| Security | Your home; if you don’t repay, the lender may take possession of it | No asset secures it |
| Rate | Most are variable, typically based on the lender’s prime rate | Usually variable |
| Rate compared with other credit | Usually lower than other loans and lines of credit | Usually lower than a credit card or personal loan |
| Limit | Set by the federal loan-to-value limits below and your equity | Set by the lender from your income, other debts and credit report and score |
| What you need | Home equity: more than 35% for a standalone HELOC, 20% if combined with a mortgage | Lenders usually require a minimum household income |
| Approval steps | Proof of ownership, mortgage details, often an appraisal, and a lawyer or notary to register the home as collateral; a stress test at a bank | Identity, income, debts and credit review |
| Fees | May include appraisal, legal, title search, administration and monthly fees | Some charge registration or administration fees; some don’t |
| Minimum payment | Interest only, or principal and interest, as the lender requires | Usually equal to the monthly interest |
| When you sell your home | The HELOC has to be repaid | Not affected |
What the rate gap costs
Each lender sets its own rates, and FCAC says your credit score affects the rate on a line of credit, so the gap depends on your offers. The example below uses assumed margins over the Bank of Canada’s published prime rate of 4.45% (as of 2026-10-14) to show how the cost scales with the balance.
Example: a HELOC at prime plus 0.50 (4.95%) and a personal line of credit at prime plus 3.50 (7.95%), a gap of 3.00 percentage points. Annual interest on a balance carried for a full year is the balance × the rate.
| Balance | HELOC interest a year | Personal line of credit interest a year | Difference |
|---|---|---|---|
| $10,000 | $495 | $795 | $300 |
| $25,000 | $1,238 | $1,988 | $750 |
| $50,000 | $2,475 | $3,975 | $1,500 |
| $100,000 | $4,950 | $7,950 | $3,000 |
Setup costs work against the HELOC on a small balance. If opening it cost $1,000 in appraisal and legal fees, the interest saved would cover that in 3.3 years on a $10,000 balance ($1,000 ÷ $300) and 0.7 years on a $50,000 balance ($1,000 ÷ $1,500).
Both rates are usually variable, so both move when the lender changes its prime rate. FCAC lists rising rates as a risk of both products.
Borrowing limits
At a federally regulated lender, two limits apply: the revolving part of a HELOC can't exceed 65% of the home's value, and everything borrowed against the home (the mortgage plus the HELOC, or a refinanced mortgage) can't exceed 80% of its value. HELOC room is therefore the lower of 80% of the value minus the mortgage and 65% of the value. Mortgage insurance can't take a refinance above 80%, except a refinance to build secondary suites that takes no equity out. FCAC’s equity minimums make the standalone limit lower: with more than 35% equity required, everything secured on the home has to stay under 65% of its value (100% − 35%). The best HELOC rates guide works through both limits for one home, and the HELOC calculator estimates yours.
A personal line of credit has no formula tied to property. FCAC says the lender reviews your income, your debts with other institutions and your credit report and score, and usually requires a minimum household income; your credit score also affects the rate.
Qualifying
A HELOC goes through a mortgage-style approval. FCAC says you must pass a stress test to qualify for a HELOC at a bank. Lenders check that you could afford the payments at the greater of your contract rate plus 2% or 5.25%, a floor set by OSFI for uninsured mortgages and by the federal government's mortgage insurance rules (the Minister of Finance's Eligible Mortgage Loan Regulations) for insured ones. The lender may also ask for proof of ownership, your mortgage details and an appraisal, and a lawyer (or notary in Quebec) registers the home as collateral. A personal line of credit skips the property steps: no appraisal and no registration on title.
Interest-only payments
FCAC says a line of credit’s minimum payment is usually equal to the monthly interest, and that paying only the interest means you’ll never pay off the debt; a HELOC lender may set the same minimum. Paying a fixed amount above the interest sets a payoff date.
Example: a $50,000 balance at the 4.95% HELOC rate above.
- Interest-only: $206.25 a month ($50,000 × 4.95% ÷ 12), or $24,750 over ten years, with $50,000 still owing.
- $750 a month: paid off in about 78 months, with about $8,590 of interest in total (months = log(1 ÷ (1 − monthly rate × $50,000 ÷ $750)) ÷ log(1 + monthly rate), at a constant rate).
When each one fits
A HELOC fits a homeowner with enough equity who expects to borrow a larger amount over a longer period, such as renovations paid in stages or consolidating higher-rate debt, and who accepts that the home secures the debt. A readvanceable HELOC combined with a mortgage is also the vehicle for the Smith Manoeuvre.
A personal line of credit fits someone who doesn’t own a home or doesn’t want to pledge it, needs a smaller amount, wants to skip the appraisal and legal steps, or wants to leave home equity available for something else.
Interest deductibility doesn’t depend on which one you use. Interest is deductible when the borrowed money is used to earn income from a business or property, such as rent, interest or dividends, whatever secures the loan; it follows the money's current use, which you must be able to trace, and it isn't deductible on money used personally, on money borrowed for an RRSP, TFSA or FHSA contribution, or on an investment that can only produce capital gains.
Other options
- A personal loan has fixed payments of principal and interest and a set end date. FCAC says a line of credit usually has a lower rate than a credit card or personal loan.
- A refinance adds the amount to your mortgage at a mortgage rate, with new amortizing payments; see HELOC vs refinance.
- A balance transfer credit card can carry a promotional rate for a set period; the balance transfer calculator compares offers.
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them between September 29, 2026 and October 19, 2026. How we check facts.
- Bank of Canada: Data table
- Bank of Canada: Interest rates posted for selected products by the major chartered banks
- Bank of Canada: Data table
- Canada Revenue Agency: Line 22100 – Carrying charges, interest expenses and other expenses
- Canada Revenue Agency: Income Tax Folio S3-F6-C1, Interest Deductibility
- CMHC: CMHC Refinance for Building Secondary Suites
- CMHC: CMHC Purchase
- Financial Consumer Agency of Canada: Home equity lines of credit
- Justice Laws (Canada): Bank Act
- Justice Laws (Canada): Eligible Mortgage Loan Regulations
- OSFI: Residential mortgage underwriting practices and procedures
- OSFI: OSFI exempts uninsured mortgage straight switches from the prescribed MQR and…
- OSFI: Amendments to the minimum qualifying rate for uninsured mortgages