Editor's note, October 6, 2026: this article was reviewed and rewritten in our accuracy check. An earlier version contained rate spreads and fee figures we could not trace to a source; they have been removed or replaced with figures from the sources listed at the end of the article.
If you own a home with equity, you can usually borrow against it in one of two ways: a home equity line of credit (HELOC) or a second mortgage. They work very differently.
How a HELOC works
- A revolving line of credit secured by your home. You borrow, repay and borrow again up to your limit.
- Usually a variable rate tied to the lender's prime rate, and often interest-only minimum payments.
- At federally regulated lenders, the revolving HELOC portion is limited to 65% of your home's value, and total borrowing secured by the home (mortgage plus HELOC) to 80% for uninsured lending.
- Often combined with your mortgage in one "readvanceable" product, so the credit available grows as you pay the mortgage down.
The Financial Consumer Agency of Canada cautions that interest-only payments mean the debt doesn't go down unless you pay more, and that the lender can change or reduce the limit.
How a second mortgage works
- A lump-sum loan registered on title behind your first mortgage.
- Repaid on a schedule over a set term.
- Often from lenders other than your bank, including private lenders, at higher rates and with fees, because the second lender is paid only after the first.
Example of how much equity you can access
On a home worth $1,000,000 with a $500,000 mortgage: 80% of the value is $800,000, so a federally regulated lender could in principle allow up to $300,000 more in total secured borrowing, of which the revolving HELOC part couldn't exceed 65% of the value ($650,000) together with any other revolving credit. Your actual limit depends on your income, credit and the lender's appraisal.
When a HELOC fits
- Costs that come in stages, like a renovation, where you only want to pay interest on what you've used.
- A backstop for emergencies, if you have the discipline not to use it for everyday spending.
- You qualify with a regulated lender.
When a second mortgage fits
- You need a lump sum and want a fixed repayment schedule.
- You don't want to refinance a first mortgage with a low rate or a large penalty.
- You can't qualify for a HELOC; in that case, read the terms carefully. Ontario's regulator, FSRA, notes that private mortgages often have higher fees, interest-only payments and short terms, and should usually be a short-term solution.
Also consider
- Refinancing your first mortgage, which may give a lower rate but can trigger a prepayment penalty mid-term. See our HELOC vs refinance comparison.
- Costs: appraisal, legal and registration fees apply to most secured borrowing.
- Your home is the security. If you can't pay, the lender can enforce against it. Our power of sale guide explains the process.
Frequently asked questions
Can my lender reduce my HELOC limit?
Yes. The Financial Consumer Agency of Canada notes that lenders can change or reduce a line of credit, for example if your home's value falls or your finances change. Don't rely on unused HELOC room as your only emergency plan.
Is HELOC interest tax-deductible?
Interest on money borrowed to earn investment or business income can be deductible; interest on money used for personal spending, such as a renovation of your own home, is not. Talk to a tax professional before you rely on a deduction.
Which costs more over time?
It depends on the rate, fees and how quickly you repay. A HELOC with interest-only payments can cost more over time if the balance never goes down; a second mortgage often has a higher rate and fees but a fixed payoff date.
Thinking about borrowing against your home? Talk to a licensed mortgage professional; Summitly's mortgage financing is arranged through our partner, Mortgage Squad Advisors. You can also ask Zara, Summitly's AI virtual agent.
