What is a HELOC, and how does it work in Canada?

Jan 9

Renee Huse, founder of Spire Mortgage Team in Alberta, has helped hundreds of homeowners tap into their home equity without giving up a great rate or locking themselves into payments they can’t control.

If you own a home in Alberta and bought it more than three years ago, you may be sitting on more equity than you realize. With home values elevated in Calgary, Edmonton, Red Deer, and beyond, many Alberta homeowners are in a strong position to access equity without refinancing. One of the most flexible ways to do that is with a Home Equity Line of Credit, commonly called a HELOC.

What is a HELOC in simple terms?

A HELOC in Canada is a secured line of credit attached to your home that allows you to borrow up to 65% of your home’s value, repay as needed, and only pay interest on the amount you use. It works like a high-limit credit card backed by your home but at much lower cost than typical unsecured credit.

Most HELOCs are variable-rate products linked to the bank prime rate. As of early 2026, bank prime is 4.45%. Depending on your lender and credit profile, HELOC pricing generally ranges from Prime + 0% to Prime + 1%.

You only pay interest on what you draw
Interest-only payments are possible
You can repay and re-borrow without reapplying
Minimum 20% equity is typically required

What you will learn in this article

When a HELOC makes more sense than refinancing
The difference between a HELOC, a refinance, and a second mortgage
How much equity you need to qualify
Why adding a HELOC at mortgage renewal can be smart
How much you can borrow
How to qualify in Alberta
Which lenders offer HELOCs in Alberta
An Alberta case study showing real numbers
Key terms defined
Frequently asked questions

When does it make sense to use a HELOC instead of refinancing?

A HELOC often makes more sense than refinancing when you want access to equity but don’t want to give up a low existing mortgage rate. Many Alberta homeowners locked in rates under 3% before the Bank of Canada rate hikes. In those situations, refinancing your entire mortgage would replace that low rate with something much higher.

A HELOC lets you access equity without disturbing your current mortgage structure. This can be helpful if you are planning renovations, need extra cash for life events, or want to manage variable income without locking into fixed monthly payments.

What is the difference between a HELOC, refinance, and second mortgage?

Feature	HELOC	Refinance	Second Mortgage
Loan type	Revolving line of credit	New mortgage replaces your current one	Separate loan registered behind your first mortgage
Interest rate	Variable, usually Prime + 0% to +1%	Fixed or variable	Usually fixed
Access to funds	Borrow as needed, repay and reuse	One-time lump sum	One-time lump sum
Impact on existing mortgage	No change. HELOC is usually added beside your mortgage	Replaces your current mortgage entirely	Registered behind your first mortgage
Repayment structure	Interest-only or flexible repayment	Fixed payments over your amortization	Fixed payments, usually shorter term (1–3 years)
Equity required	At least 20%	At least 20%	Varies. Lower equity often means much higher rates
Typical use	Renovations, cash flow, flexibility	Large lump sum or restructuring debt	Short-term financing or higher-risk credit
Qualification	Full income, credit, and stress test	Full income, credit, and stress test	Can allow alternative income or credit profiles
Flexibility	High	Low	Medium
Penalty to exit	None	Yes. Interest rate differential or three months’ interest	Varies. Shorter terms often avoid penalties

Why adding a HELOC at mortgage renewal often makes the most sense

The best time to add a HELOC is often at mortgage renewal. When your mortgage term ends, you can adjust your mortgage structure without penalties. You are not breaking your mortgage early; you are simply choosing a new structure as part of your renewal.

By adding a HELOC at renewal, you open flexibility for future borrowing without having to refinance again later. This works well for Alberta homeowners who want access to funds for renovations, variable income, or future life events while keeping their low mortgage rate intact.

How much can you borrow using a HELOC?

HELOCs can go up to 65% of your home’s appraised value. If your mortgage and HELOC are with the same lender, the total combined borrowing can go up to 80% of your home’s value.

Example:

Home value: $600,000
Mortgage balance: $350,000
80% of $600,000 = $480,000
Available HELOC room = $480,000 - $350,000 = $130,000

Even if the math supports it, lenders will consider your income, credit score, and existing debt before granting full access.

How do you qualify for a HELOC in Alberta?

To qualify for a HELOC in Alberta, most lenders require:

Minimum 20% equity in your home
Credit score of 680 or higher
Provable income
Low debt service ratios
A recent home appraisal confirming value

You must also pass the federal stress test, qualifying at the greater of the benchmark rate or your contract rate plus 2%.

Which lenders offer HELOCs in Alberta?

Spire Mortgage Team works with Alberta lenders offering HELOC products including:

Scotiabank STEP – Combined mortgage and HELOC structure
TD Flexline – HELOC with fixed-rate segments
Manulife One – Blends banking and borrowing
ATB HELOC – Alberta-based option from the provincial bank
Servus Credit Union – Member-driven Alberta credit union

Alberta Case Study

Client: Married couple in Calgary

Home value: $720,000

Mortgage: $420,000 at 2.29%, insured, due 2029

Goal: Fund a legal basement suite without refinancing the main mortgage

Strategy: Added a HELOC for $156,000 (80% of $720,000 - $420,000). Drew $75,000 at 5.45% with interest-only payments of $340/month.

Result: They kept their ultra-low mortgage rate and built a legal rental suite—adding monthly income without increasing fixed debt payments.

HELOC Glossary

HELOC: Home Equity Line of Credit—revolving credit secured by your home
Equity: The difference between your home’s market value and what you owe
Loan-to-Value (LTV): The ratio of your loan amount to your home’s value
Refinance: Replacing your current mortgage with a new one
Second Mortgage: A separate loan registered behind your first mortgage
Stress Test: Federal rule requiring qualification at a higher rate
Revolving Credit: Credit you can borrow, repay, and reuse
Appraisal: An expert’s valuation of your property
Prime Rate: The bank’s base rate used to price HELOCs

Frequently Asked Questions about HELOCs

What does HELOC stand for?: HELOC stands for Home Equity Line of Credit. It is a revolving credit product secured by the equity in your home.
Can I get a HELOC with my current lender?: Yes, but that doesn’t mean it’s your best option. Some lenders offer more flexibility or better pricing. We compare all available Alberta options on your behalf.
Is a HELOC better than refinancing?: If you have a low fixed mortgage rate, a HELOC lets you access equity without replacing that rate. Refinancing means giving up your current mortgage and potentially paying more in interest long-term.
Can I use a HELOC to pay off debt?: Yes, but only with a clear plan. A HELOC can help reduce interest costs on higher-rate debt, but without discipline it can become revolving, long-term debt.
Do HELOC rates change?: Yes. HELOCs are variable-rate products tied to the lender’s prime rate. If prime goes up, so does your HELOC rate.
Can I pay off a HELOC early?: Yes. HELOCs are fully open and can be repaid at any time without penalty—whether partially or in full.

Talk to a Mortgage Strategist

Give us a call or fill out an application at this link and our team will get in touch with you to start building a plan that suits you.

Renee Huse