A Home Equity Line of Credit (HELOC) is a flexible borrowing option that allows homeowners to leverage their home’s equity as collateral for a revolving line of credit. HELOC rates play a crucial role in determining the cost of borrowing, impacting monthly payments and long-term affordability. As a homeowner in Canada, understanding HELOC rates in Canada, how they work, and what factors influence them can help you make an informed financial decision.
What Determines HELOC Interest Rates?
Several factors influence HELOC interest rates, including:
- Prime Rate: Most HELOCs in Canada have variable interest rates, which fluctuate based on the lender’s prime rate. The prime rate is influenced by the Bank of Canada’s monetary policy.
- Lender-Specific Markups: Different banks, such as TD HELOC rates, may vary based on internal lending policies and risk assessments.
- Borrower’s Credit Score: A strong credit score may help secure lower HELOC rates.
- Loan-to-Value (LTV) Ratio: The more equity a borrower has in their home, the more favourable their HELOC rates TD may be.
- Debt-to-Income Ratio: Lenders assess a borrower’s ability to repay based on their income and outstanding debts.
HELOC Rates in Canada: A Comparative Overview
How HELOC Rates Compare to Other Loan Products
Compared to unsecured credit lines and credit cards, HELOC interest rates are generally lower since they are secured by your home. However, they tend to be slightly higher than mortgage rates.
Are HELOC Interest Rates Fixed or Variable?
A frequently asked question is, Are HELOC interest rates fixed or variable? In most cases, HELOCs in Canada come with variable rates, meaning they fluctuate based on the prime rate. Some lenders offer the option to convert part of the HELOC balance to a fixed rate, providing more stability in repayment.
Types of HELOCs in Canada
1. Standalone HELOCs
A standalone HELOC is an independent line of credit not tied to a mortgage. These products allow borrowers to access up to 65% of their home’s value.
2. HELOCs Combined with a Mortgage
Also known as readvanceable mortgages, these allow homeowners to increase their available credit as they pay down their mortgage principal. Some major banks offering these products include TD HELOC rates and Scotiabank STEP.
How to Qualify for the Best HELOC Rates
To secure the most competitive HELOC rates in Canada, consider the following:
- Maintain a Good Credit Score: Most lenders require a minimum credit score of 680 for approval.
- Build Home Equity: The more equity you have, the better your chances of getting favourable rates.
- Compare Lenders: Check offerings from TD HELOC rates, RBC, Scotiabank, and other major banks.
- Reduce Debt-to-Income Ratio: A lower debt burden increases your chances of approval at a lower rate.
Current HELOC Rates in Canada
As of February 19, 2025, the prime rate in Canada is 5.20%. HELOC rates are typically set at the prime rate plus a lender-specific premium. Below is a table summarizing the current Home Equity Line of Credit (HELOC) rates and maximum Loan-to-Value (LTV) ratios offered by various Canadian financial institutions:
| Bank/Lender | HELOC Rate* | Loan-to-Value (LTV) |
| TD Canada Trust | Prime + 0.50% | Up to 65% (Standalone) / Higher (Combined) |
| Scotiabank | Prime + 0.50% | Up to 65% (Standalone) / Higher (Combined) |
| RBC | Prime + 0.50% | Up to 65% (Standalone) / Higher (Combined) |
| MCAP | Prime + 0.50% | Up to 65% (Standalone) / Higher (Combined) |
| Motusbank | Prime + 0.50% | Up to 65% (Standalone) / Higher (Combined) |
Note: HELOC rates are generally tied to the Prime Rate + a lender-specific premium. Rates are subject to change based on market conditions and individual creditworthiness. The maximum LTV ratio indicates the highest percentage of your home’s appraised value that you can borrow.
The Maximum Loan-to-Value (LTV) for HELOCs can vary significantly. Standalone HELOCs typically have a maximum LTV of around 65%. Combined HELOCs (readvanceable mortgages) may allow for higher LTVs, but the combined LTV of your mortgage and HELOC usually won’t exceed a certain limit (often less than 80%). Contact lenders directly to confirm their specific LTV policies and how they apply to your situation.
Planning Your HELOC Borrowing Strategy
1. Set a Purpose for Your HELOC
Using a HELOC responsibly can help finance home renovations, consolidate debt, or fund education expenses. Avoid unnecessary borrowing that can lead to financial strain.
2. Monitor Interest Rate Trends
Since HELOCs typically have variable rates, tracking changes in the Bank of Canada’s policy rate is crucial to anticipating future rate hikes or cuts.
3. Create a Repayment Plan
Making payments above the interest-only minimum ensures faster repayment and reduces total interest costs over time.
The Future of HELOC Rates in Canada: Making the Right HELOC Decision
Given recent Bank of Canada rate cuts and market trends, analysts predict continued adjustments in HELOC rates Canada. Economic conditions, inflation, and monetary policy shifts will shape borrowing costs in the coming months.
HELOCs offer a flexible and cost-effective way to access your home’s equity, but understanding HELOC rates TD and their impact on your finances is essential. Whether choosing a TD HELOC rate, another bank’s product, or an alternative financing option, careful planning is key to ensuring financial stability.
Get Expert HELOC Guidance with Pegasus Mortgage Lending!
For personalized advice on securing the best HELOC rates in Canada, consult the experts at Pegasus Mortgage Lending Center. We provide expert guidance, fast approvals, and customized mortgage solutions tailored to your needs. Start your mortgage journey today!
