How HELOC limits actually work
Two rules apply at once, and whichever is more restrictive wins: the HELOC portion alone can never exceed 65% of your home's appraised value, and your total secured debt — any mortgage plus the HELOC — can't exceed 80% of that value. These limits come from OSFI's Guideline B-20, the same federal banking regulation that governs mortgage stress testing, and they apply uniformly across federally regulated lenders. Most HELOCs are revolving and interest-only, meaning your minimum payment only covers the interest on what you've actually drawn, not the principal — which is convenient month to month but means the balance won't shrink unless you pay more than the minimum, unlike a traditional mortgage that amortizes down automatically.
HELOC vs. refinancing: two different tools
A HELOC and a cash-out refinance both let you access home equity, but they work differently. Refinancing replaces your entire mortgage with a new, larger one at a new rate — you get a lump sum, and your whole balance is now amortizing at whatever rate you locked in. A HELOC sits alongside your existing mortgage as a separate, revolving credit line — you only pay interest on what you draw, and you can pay it down and redraw it repeatedly without reapplying, closer to how a credit card works but secured by your home and at a much lower rate. If you only need occasional access to a chunk of equity rather than a single large amount today, a HELOC is often the more flexible and cheaper option; if you want to lock in a lower rate on your whole mortgage while also pulling out cash, refinancing might make more sense.
What people actually use a HELOC for
Common uses include funding a down payment on an investment or second property, covering a major renovation without disrupting your existing mortgage, consolidating higher-interest debt like credit cards at a much lower rate, or simply having emergency access to a large credit line without carrying the cost of an unused loan (since you don't pay interest on the undrawn portion). Because the rate is usually variable and tied to your lender's prime rate, your payment can move up or down over time — worth factoring in if you're planning to carry a balance for a while rather than pay it off quickly.
Thinking about using a HELOC to fund a down payment on another property? See how that plays out in the affordability calculator's advanced section, or check the rental cash flow calculator if the next property would be an investment.