If you own a home in Ontario and want to borrow against it, there are two main doors. You can refinance, which replaces your mortgage with a bigger one, or you can open a home equity line of credit, a HELOC, which sits beside the mortgage and leaves it alone. Both are secured on the house, both come in well below credit card rates, and both are often described as "tapping your equity" as if they were the same thing.
They aren't. They follow different limits, cost different amounts in different ways, and ask different things of the person paying them back. Here's one household working through the choice, with every figure run through our home equity calculator.
Nadia and Ben want $100,000
Their house in Oakville is worth about $900,000. They owe $450,000 at 4.19%, with 20 years of amortization left, and the term is up for renewal in a few months. They'd like $100,000 to add a bedroom over the garage.
For the comparison we'll use a refinance rate of 4.29% and a HELOC at prime plus half a point. Prime was 4.45% on 23 September 2026, according to the Bank of Canada, so that's 4.95%. Those are illustrative rates; the offers you're given may differ.
How much can be borrowed at all
Equity is the value less what's owed: $450,000 here. Not all of it can be borrowed.
Federally regulated lenders work under OSFI's Guideline B-20, which sets two ceilings. Everything secured on the home, mortgage and HELOC together, can reach 80% of its value. The revolving part, the HELOC on its own, can reach 65%. Since a June 2022 clarification, any borrowing between 65% and 80% has to be an amortizing mortgage that gets paid down, not open credit.
For Nadia and Ben:
| Estimate | |
|---|---|
| 80% of $900,000 | $720,000 |
| Less what they owe | $450,000 |
| Room under the 80% ceiling | $270,000 |
| 65% ceiling for a HELOC | $585,000 |
| Equity that stays out of reach | $180,000 |
With a $450,000 mortgage, the 80% ceiling is the one that bites. The HELOC could, in principle, reach $270,000 and so could a refinance, less its costs.
The 65% limit starts to matter when the mortgage is small. If they owed only $100,000, the 80% test would allow $620,000 of new borrowing, but a HELOC would stop at $585,000. The rest would have to come as an amortizing mortgage.
These are ceilings, not approvals. Income, other debts, credit and the stress test decide what a lender would actually lend, and the appraisal may come in above or below the value you have in mind.
Qualifying is the same test either way
It's easy to assume a HELOC is simpler to get because it feels like a credit card. It isn't. Both are new borrowing secured on your home, so the lender looks at your income and debts and tests the payment at a qualifying rate: the greater of the contract rate plus two points or 5.25%. A refinance at renewal is a new application too, not a simple switch, so the same test applies.
One difference worth knowing: a HELOC can be reduced or frozen by the lender later. Room that's there today isn't promised for next year.
Collateral charges, briefly
If your mortgage is registered as a collateral charge, it may be registered on title for more than you borrowed, sometimes the full value of the home. That can make adding a HELOC with the same lender straightforward, without new legal work. The trade-off is that moving to another lender at renewal can be more involved, because the new lender can't simply take over the registration.
A standard charge is registered for the amount of the mortgage. Adding a HELOC with the same lender may mean re-registering; adding one elsewhere puts it in second position, which fewer lenders offer. Your mortgage documents, or your lender, can tell you which you have.
What $100,000 costs, three ways, over five years
The calculator compares the options against simply keeping today's mortgage, so each figure is the extra cost of borrowing.
| $100,000, estimated | Refinance at 4.29% | HELOC, interest only | HELOC, paid down over 10 years |
|---|---|---|---|
| Added to what goes out each month | $652 | $413 | $1,058 |
| Closing costs | $1,500 | not included | not included |
| Extra interest over 5 years | $21,871 | $24,750 | $19,636 |
| Cost over 5 years, all in | $23,371 | $24,750 | $19,636 |
| Still owed after 5 years | $84,241 | $100,000 | $56,144 |
The refinance. The mortgage becomes $551,500 (the $450,000 they owe, the $100,000, and $1,500 of legal and appraisal costs added in) over the same 20 years. Their payment goes from about $2,764 to about $3,416. One detail hides inside the interest: moving the $450,000 they already owe from 4.19% to 4.29% accounts for about $2,100 of it on its own, before a dollar is borrowed. The rate applies to the whole mortgage, not just the new money.
The HELOC, interest only. At 4.95%, the interest on $100,000 is about $413 a month. That's the lowest payment on the table, and after five years they'd still owe every dollar of it. It's the flexible option, and the flexibility runs both ways.
The HELOC, paid down. If they treat the line like a loan and clear it over ten years, the payment is about $1,058 a month. Over five years that's the cheapest column, but only because it's repaying fastest. Paid down over five years instead, the payment would be about $1,885 and the interest about $13,090, with nothing left owing.
So the table doesn't crown a winner. The refinance charges a lower rate but stretches the $100,000 over twenty years. The HELOC charges more per dollar, floats with prime, and lets them decide how fast to pay. Which of those suits a household depends on how much monthly room it has and how disciplined it wants to be forced to be.
If it were mid-term
Timing changes the refinance, not the HELOC. Nadia and Ben are near renewal, so there's no penalty. Had they been two years into the term, breaking it would bring a prepayment charge. Using three months' interest, about $4,673 on their balance, the refinance's upfront cost rises to about $6,173 and its five-year cost to about $28,955, while both HELOC columns stay as they were. On a fixed-rate mortgage the penalty may be an interest rate differential instead, which can be much larger, and our break calculator estimates it.
That's often the practical answer to the HELOC-versus-refinance question: mid-term, a HELOC can avoid breaking a mortgage you'd otherwise keep; at renewal, the penalty argument disappears.
Weighing it up
A few things tend to decide it, beyond the table.
How much, and how fast it'll be repaid. A modest amount you'll clear in a few years suits a line of credit. A large amount you'll carry for a long time is closer to what a mortgage is for.
Whether the rate moving matters. HELOC rates follow prime, which moves when the Bank of Canada does. A fixed refinance holds for the term.
What else is on the table. If the money is to clear higher-interest debt, our debt consolidation calculator looks at that question directly, including the 80% check.
You can run your own numbers in the home equity calculator. It runs in your browser, nothing you type is sent to us, and it shows the 65% and 80% limits for your home before you look at any cost. If you'd like to know what a lender might actually approve, a licensed broker can compare offers across lenders, and you can book a free conversation if that would help. The other tools are all on the calculators page.
Nadia and Ben are an illustrative composite. Rates are examples, prime is the Bank of Canada figure for 23 September 2026, and all figures are estimates using semi-annual compounding for mortgages and monthly interest for the HELOC. Limits are OSFI Guideline B-20 for federally regulated lenders; credit unions regulated by the province may differ. This is general information, not advice about your situation, and nothing here is a recommendation.