A Home Equity Line of Credit (HELOC) is a versatile financial tool that allows homeowners to borrow against the equity in their homes. Equity is calculated as the difference between your home's market value and the outstanding balance of your mortgage. For instance, if your home is worth $500,000 and you owe $300,000 on your mortgage, your equity is $200,000. A HELOC lets you access this equity, usually up to 65-80% of your home's appraised value, depending on the lender's policies.

In Canada, HELOCs are popular for their flexibility, as they operate much like a credit card—you borrow only what you need and pay interest on the amount borrowed. But what if you want a HELOC from a different bank than your primary mortgage provider? Here's a list of frequently asked questions about applying for a home equity line of credit.

Can You Get a HELOC From a Another Bank That's Different Than Your First Mortgage?

Yes, it is possible to get a HELOC from a different bank than the one holding your mortgage. You would be getting a HELOC in 2nd position if you have an existing mortgage, whether you are getting your HELOC from the same lender as your first mortgage or from another lender. You will need to work with a mortgage broker to access these lenders in Canada.

Benefits of Choosing a Different Bank for Your HELOC:

Competitive Rates and Terms: Different banks may offer more favorable interest rates, flexible repayment options, or lower fees. Comparing options could save you significant amounts over time.

Specialized HELOC Products: Some banks specialize in HELOCs and may provide enhanced features, such as interest-only payment periods or better online management tools.

Diversification of Financial Products: Keeping your mortgage and HELOC separate could allow you to benefit from varying services and customer support.

Before Applying for a HELOC From Another Bank:

Second Mortgage Registration: If you already have a first mortgage, getting a HELOC in second position require registering a second mortgage on your home—this means your HELOC rates will be higher than your first mortgage.

Equity and Debt Ratios: Banks assess your total equity and debt ratios when considering your HELOC application. Talk to a mortgage broker to get professional advice on your income, equity, credit, and debt qualifications.

Appraisal Costs: The new lender will require a new appraisal to confirm your home’s value as a part of the application process.

Can You Get a Home Equity Line of Credit Without Refinancing?

Yes, adding a HELOC in second position does not necessarily require refinancing your existing first mortgage. Banks can register a HELOC as a second charge on your property. This allows you to access equity without altering the terms of your primary mortgage. However, some lenders may incentivize refinancing to consolidate products under one provider.

Can You Use a Line of Credit for a Down Payment to Buy a House?

Yes, you can use a HELOC for a down payment for another property. However, the borrowed funds will be considered as debt when calculating your debt service ratios. Talk to a qualified mortgage broker to make sure your total debt obligations do not exceed lender thresholds to qualify for a new mortgage.

Can You Get a Home Equity Line of Credit With Bad Credit?

Yes, it will be challenging but possible. Lenders prioritize strong credit scores for HELOC approvals. If your credit is subpar, working with a mortgage professional will give you guidance on how to improve your profile as well as match you with the right product. Credit scores will have an impact on your approval and pricing.

Can You Get a Home Equity Line of Credit With No Job or No Income?

Yes, but not with an institutional lender (i.e. banks). There are a few non-institutional or private lenders in Canada with a home equity line of credit product that will qualify you based on your available equity. Private HELOCs will have slightly higher pricing if you have credit or income challenges.

Can You Get a HELOC on a Rental Property?

Yes, but the terms are typically stricter. Applying for a HELOC on a rental property requires the borrowers to have stronger credit and max out at a lower loan-to-value ratio, meaning you can borrow less than if you were to apply on your primary residence. Interest rates may also be slightly higher compared to owner-occupied properties.

Can You Sell Your House If You Have a Home Equity Line of Credit?

Of course! However, the HELOC balance must be paid off upon the sale of the home. The proceeds from the sale are often used to settle any outstanding HELOC or mortgage balances.

Can You Increase Your Limit on a Home Equity Line of Credit?

Yes, if your home’s value has appreciated or your equity has increased due to mortgage payments. You’ll need to work with a mortgage broker and get a new appraisal in order for you to refinance your existing HELOC.

Should You Get a Home Equity Line of Credit?

A HELOC is a smart option for those needing flexible access to funds for renovations, investments, or emergency expenses. Having access to cheap credit can be very helpful in times of need or opportunity as long as you have strong financial habits to avoid overspending.

Should You Get a Home Equity Line of Credit to Pay Off Debt?

HELOCs often have lower interest rates than credit cards or personal loans, making them a good choice for consolidating high-interest debt. However, avoid prolonged financial strain by staying disciplined with your repayment schedule.

Does a Home Equity Line of Credit Affect Your Credit Score?

Yes. Opening a HELOC results in a credit inquiry, which may slightly lower your score initially. Responsible use, such as making timely payments and keeping balances low, can improve your credit score over time.

HELOC Interest Rates in Canada

HELOC interest rates in Canada are typically variable and tied to the lender’s prime rate. As of 2025, rates range between 6% and 8%, but they fluctuate based on market conditions. Shopping around and negotiating can help secure a favorable rate.

Are You Looking to Get a HELOC From a Different Bank?

You can get a HELOC from a different bank than your mortgage provider, offering flexibility and potential cost savings.

Weigh the benefits and challenges carefully, including additional fees and qualification hurdles. Evaluate your financial situation and goals to ensure a HELOC aligns with your needs.

With proper research and planning, a HELOC can be a powerful tool for Canadian homeowners, providing financial flexibility and stability.