Knowing Your Options For A Home Equity Line Of Credit (HELOC)

Home equity line of credit

When it comes to understanding how to consolidate your debt, knowing all of your options is a good start. Many Canadians struggle with debt, be it credit card, car payments, student loans, and especially mortgage payments. We understand how difficult it can be to manage all of this all while taking care of yourself and your family.


credit debt

The first step in understanding how to get back on track by organizing your life to make your debt payments manageable. For this a mortgage advisor is the best place to start. If the option is right for you, they can help you obtain your home equity in order to help pay off your debt. They can also help you restructure your spending habits to make sure you can stay out of debt and make your home equity line of credit (HELOC) count.

Your HELOC will still need to be repaid; however, when you are only paying one payment, with one interest rate, it can drastically reduce stress. Causing things to be less overwhelming, not having multiple bill payments with various interest rates coming in.

What is a Home Equity Line of Credit (HELOC)?

  • Maximum loan-to-value (LTV) = 65% of appraised value
  • It is a line of credit secured by way of a collateral mortgage on the title to your home/property. The interest rate is set by the Prime Rate and is much lower than a personal unsecured line of credit. Maximum Loan-to-Value (LTV) is 65% of appraised value.

Determining Your Equity

Your home Equity is based on the difference between your home’s value and the unpaid balance of your existing mortgage. Home equity has the potential to raise in worth by one of two ways, either you pay your mortgage down and the difference grows, or the value of your home increases.

A stand-alone HELOC has a maximum Loan-to-Value (LTV) of 65%, and a mortgage has a maximum LTV of 80%. You can have a mortgage and HELOC under one charge on a title, going to an LTV of 80%. Just remember, you will need to subtract the amount still owing on your mortgage!

How to Qualify For a Home Equity Line Of Credit


According to the Financial Consumer Agency of Canada, in order to qualify for a home equity line of credit you will require:

A minimum down payment or equity of 35% if you want to use a stand-alone home equity line of credit as a substitute for your mortgage.

Lender Requirements

Your lender will have requirements before you can be approved for a home equity line of credit which include:

  •  A Satisfactory Credit Score
  • Proof Of An Appropriate & Stable Income
  • A Suitable Level Of Debt Compared To Your Income

In order to qualify for a Home Equity Line Of Credit, you will need to pass a stress test. This is to ensure that you can afford payments at a higher rate than the rate of your contact to avoid problems if rates increase. The lender wants to be sure you can pay it off.


HELOC’s are not necessarily subject to the same rate fluctuations as mortgages. HELOC’s are always set with a prime, which means that they fluctuate, but your mortgage can either have a fixed or variable rate.

Potential Benefits Of A HELOC:

Mortgage relief

One of the main benefits of debt consolidation is that it will buy you time and emotional release from current debt pressures. Studies have shown that the stress of too much debt can impact more than your mental health, and it can also be affecting other parts of your life.

HELOC Requirements:

  • Minimum Payments Required = Interest Only. Can Be Paid In Full At Anytime With No Penalties.
  • Readvanceable – The HELOC Can Be Paid In Full & Used Again At
  • Anytime As Needed- Maximum Flexibility
  • Low Interest Rate

A HELOC only has a minimum payment requirement of the interest and will allow you to address your budget and free up your cash flow before making principal payments. By refinancing and being serious about making and keeping to your budget, you can achieve a debt-free lifestyle! While refinancing can extend your mortgage’s life, it can get you onto the path of being debt-free a lot sooner.

home equity, money in your pocket

For more information on a home equity line of credit (HELOC), talk to a mortgage professional. They can help way your options to determine the best course of action for getting your bills and various payments under control with a HELOC. Here at The Mortgage Group, we are here to help you with all of your mortgage questions and concerns. Including, those regarding home equity. Contact us today to better understand how we can help you obtain your home equity line of credit.

Handling Debt Consolidation With Mortgage Refinancing

mortgage refinance

Understanding Home Refinancing

Many Canadians are facing high levels of personal debt. Whether it is from credit cards, vehicle purchases, loans, or more. Adding a mortgage onto all that debt can become an exhausting weight to carry! 


If you are finding that your debt load is becoming too high, there are options available. One of the first steps to take is to speak with a financial advisor. They will be able to provide you with insight into what steps you can take, how long it will take to pay everything off, and how to create a budget or plan for debt repayment. 


If you own your home, you have more options available than people who don’t. A big reason for that is that the longer you own your home, the more equity you are building. That equity can then be used to help you get back on your feet. As a homeowner, reach out to your local mortgage broker first. They will help you find ways to lessen your debt while still keeping your home. 

mortgage refinancing credit card

Home Refinancing

One option you should consider is refinancing your mortgage and using your home equity to consolidate your debts. This is commonly referred to as mortgage refinance. You can achieve this in two ways, a mortgage or a standalone Home Equity Line of Credit (HELOC). Refinancing for a home equity line of credit means you can borrow 65% of your home’s appraised value, while a mortgage refinance allows you to borrow 80% of the appraised value. 

Talking To A Mortgage Professional

Admitting that your debt has gotten out of hand can be overwhelming, with many people not knowing a refinance is available as a solution to help manage debt. Mortgage Associate Lori Grill says there is no need for embarrassment. 


“I’m not giving you any more debt, we’re just going to make it easier for you to pay it back,” says Grill.  


A professional mortgage broker will help you find ways to restructure your life and spending habits. Having one monthly payment to make is much more manageable than making multiple payments at higher rates.

mortgage refinancing debt

Potential Risks To Understand

Debt consolidation has many benefits, such as buying you time and providing an emotional release from current debt pressures.


By consolidating the debt from other sources like personal loans or credit cards, you agree to pay it over a longer period of time. This means your debt repayment will take longer than it would have originally.  


“You’re going to extend the life of this debt you have,” says Grill.  


The length of time it takes to pay off your mortgage in full is called amortization. The amortization period is discussed with your mortgage broker at the time of approval. Your mortgage broker reviews the payments and makes a decision on what would be best for your cash flow. When you consolidate your debt into your mortgage, you are taking debt payments that could be paid off in a few years and including them in your amortization, which can be 20-30 years.


Ultimately, it will depend on your individual situation. 


It wouldn’t be wise to use refinancing as a way to continue living a lifestyle that may not be sustainable. It is more like a Band-Aid solution that should be used as an opportunity to address your financial goals and reach a debt free lifestyle. By reorganizing your personal spending habits and paying off large amounts of debt you acquired, you would have otherwise struggled with, such as student loans or credit card.

Things to Consider Before Consolidating Debt:

If This Is The Right Fit For You

Before you rush out and refinance your mortgage, you need to determine if it is necessary to achieve your goals. Would it be possible to pay your debts by other means, such as savings? If you decide debt consolidation is right for you, considerations that need to be made include flexibility, fees, interest rates and terms and conditions. You should also determine what credit limit you will need.  

mortgage refinancing options

Planning For The Future

You will need to decide how you’re going to use the money you’re borrowing and create realistic budgets for yourself. Creating and sticking to a repayment plan is key.  


Mortgage interest rates will change as market interest fluctuates. According to the Bank of Canada, interest rates are low and expected to stay that way for a while. However, they will not always be this way. Considerations need to be made for how future interest rate increases may affect your plans. Thinking that you have done it once and can do it again if you need to is the wrong mindset to get into. Lenders may not be willing to assist a second time, so don’t count on it. 

Potential Costs

Something to consider beforehand is the costs that are involved with refinancing your mortgage for debt consolidation. These costs could include appraisal fees, a title search, title insurance, and legal fees. There may also be payout penalties on your existing mortgage. Often you can capitalize these costs into the mortgage, so it’s not an out-of-pocket expense.  


With the recent state of the economy due to COVID-19, more homeowners are looking at refinancing their mortgage. If you need a mortgage broker in Calgary to assist you with refinancing or debt consolidation, reach out to our team at The Mortgage Group. Our brokers are always happy to help you find the best solution.