A HELOC is revolving credit secured on your home, priced at prime plus a margin (about 4.45% prime in 2026), while a refinance replaces your mortgage with a larger one and hands you the equity as a lump sum. Model both against your balance in our mortgage calculators.
A HELOC is a revolving line at prime plus a margin — up to 65% of value standalone, 80% combined with your mortgage — with an interest-only option. A refinance replaces your mortgage up to 80% of value, at a fixed or variable rate, but may break your term and cost a penalty. Choose by need and cost. This is not financial advice.
A home equity line of credit is revolving borrowing secured against your property. You are approved for a limit and draw on it as needed, repaying and re-borrowing like a credit card. HELOCs are variable, priced at prime plus a margin, so the rate tracks the Bank of Canada overnight rate at 2.25% and moves with prime near 4.45%. A key feature is the interest-only option: you can pay just interest on your balance, keeping minimum payments low. A standalone HELOC can go up to 65% of your home's value; combined with a mortgage the total secured borrowing can reach 80%. See the full breakdown in what is a HELOC.
Refinancing replaces your current mortgage with a new, larger one — up to 80% of your home's value — and gives you the difference in cash. You choose a fixed or variable rate and a fresh term and amortization. Because it is a single lump sum with a set repayment schedule, a refinance is well suited to a one-time, defined expense. The cost to watch is the break penalty: if you refinance before your term ends you typically pay three months' interest on a variable, or the interest rate differential on a fixed. Timing a refinance for renewal avoids that penalty.
| Feature | HELOC | Refinance |
|---|---|---|
| Structure | Revolving, draw as needed | New lump-sum mortgage |
| Rate | Variable, prime + margin | Fixed or variable |
| Borrowing limit | 65% standalone / 80% combined | Up to 80% of value |
| Payment | Interest-only option | Principal + interest |
| Break penalty | None to open | Possible if mid-term |
Use a HELOC for ongoing or uncertain needs — staged renovations, a cash cushion, or tuition — where flexible access and interest only on what you draw are worth a slightly higher variable rate. Use a refinance for a single large sum, especially when you can lock a lower rate or are already at renewal, so a fixed schedule and potentially cheaper rate outweigh the loss of flexibility. Whichever route you take, you must requalify under the stress test — the higher of your contract rate plus 2% or 5.25% — and keep your GDS at or below 39% and TDS at or below 44%. Compare this with breaking your mortgage before deciding.
A HELOC is a revolving line of credit secured against your home that you draw on as needed, priced at prime plus a margin. A refinance replaces your existing mortgage with a new, larger one and gives you the extra equity as a lump sum, at a fixed or variable rate.
A standalone HELOC can go up to 65% of your home's value. Combined with a mortgage, the total secured borrowing can reach 80% of the home's value, subject to qualifying under the stress test.
It depends. A HELOC rate is variable at prime plus a margin (prime is about 4.45% in 2026) and often higher than a mortgage rate, but you only pay interest on what you draw and can pay interest-only. A refinance may offer a lower rate but can trigger a break penalty if you end your current term early.
If you refinance before your term ends, yes — you break the existing mortgage and typically pay a penalty of three months' interest on a variable, or the interest rate differential on a fixed. Refinancing at renewal avoids that penalty.
A HELOC suits ongoing or uncertain needs like renovations or a financial cushion, where you want flexible access and interest only on what you use. A refinance suits a single large lump sum, especially when you can get a lower rate or are already at renewal.