Home Equity Loan in Canada: Limits, Costs and How It Compares With a HELOC
A home equity loan advances a lump sum against the equity you already hold, registered behind your existing mortgage so the first mortgage and its rate stay exactly where they are. Institutional lenders combine first mortgage and equity loan to about 80% of the property’s value; alternative and MIC lenders go to roughly 85%. On a $900,000 home with a $500,000 mortgage, 80% is $720,000 of total lending, which leaves about $220,000 available before any lender fee.
Apply nowFour ways to reach the same equity
The right one is decided mostly by what breaking your current mortgage would cost, and whether you need the money once or repeatedly.
| Shape | Typical ceiling | Touches your first mortgage? | Best when | |
|---|---|---|---|---|
| Home equity loan | Lump sum, fixed payment | 80% (85% alternative) | No | You need a known amount once and want to keep a low first-mortgage rate |
| HELOC | Revolving, interest-only on what is drawn | 65% standalone, 80% combined | No | You will draw and repay repeatedly |
| Refinance | One new, larger mortgage | 80% | Yes — replaces it | Your current rate is at or above market, so there is little penalty to pay |
| Second mortgage | Lump sum, often interest-only, short term | 80–85% | No | Speed matters, or the file will not pass an institutional lender |
In practice "home equity loan" and "second mortgage" describe overlapping products — both are a charge registered behind the first. The difference is usually who is lending and on what terms: a bank equity loan amortizes over years, while a second mortgage from an alternative lender is often interest-only on a one-year term.
The case for not touching the first mortgage
This is the whole argument for a second charge over a refinance, and it is arithmetic rather than preference. Breaking a fixed mortgage early triggers a penalty — on a fixed term that is the greater of three months’ interest or the interest rate differential, and the IRD on a mortgage taken at a low rate during a higher-rate market can run into five figures.
Price your own break cost with the penalty calculator, then compare the two routes with the refinance vs renew calculator and the home equity calculator.
Who lends, and what it costs
Three tiers, and the pricing gap between them is wide:
- Banks and credit unions. Cheapest, slowest, strictest. Full income documentation, the qualifying-rate test applies, and a clean file is effectively required. To 80% combined.
- Alternative and B lenders. Broader income treatment — self-employed, bruised credit, rental income. A lender fee of roughly 1% is normal. To about 85%.
- MICs and private lenders. Fastest and most flexible, priced accordingly, usually interest-only on a one- or two-year term with a lender fee and a broker fee. Equity and exit plan matter more than income.
Budget for the costs that are not the rate: lender fee, broker fee on alternative and private deals, legal fees, an appraisal, and title insurance. On a $220,000 advance those typically add a few thousand dollars, and they are disclosed to you in writing before you commit.
Compare the lenders that do this work in the lender directory, or narrow to alternative lenders and private lenders and MICs.
What the money is usually for
Three uses account for most equity lending, and each has a cleaner route on this site:
- Consolidating higher-interest debt. Moving balances from 20%+ cards onto a mortgage-rate charge. The saving is real; the risk is converting unsecured debt into debt secured by your home. See debt consolidation mortgages.
- Renovation. Where the work adds value, the appraisal that supports the loan improves as a result.
- A down payment on a second property. Possible, and it changes how both files are underwritten — see rental property mortgages.
Where a revolving limit suits better than a lump sum, read HELOCs in Canada and the HELOC calculator.
Where to go next
- Lendmax: home equity loans and Lendmax: HELOC.
- Lendmax Capital: home equity loan program — the MIC’s own product terms.
- Lendmax Capital: HELOC 75 and Flexline HELOC.
- Lendmax Capital MIC in our lender directory.
Lendmax Capital MIC is under common ownership with Lendmax Inc., which owns RateShop.ca. It is one of the lenders in our directory.
Common questions
How much can I borrow with a home equity loan in Canada?
Institutional lenders combine your first mortgage and the equity loan to about 80% of the property value. Alternative and MIC lenders go to roughly 85%. On a $900,000 home with a $500,000 mortgage, 80% leaves about $220,000 available before fees.
What is the difference between a home equity loan and a HELOC?
A home equity loan is a lump sum with a set payment. A HELOC is a revolving limit you draw and repay repeatedly, interest-only on the drawn balance. A standalone HELOC is capped at 65% of value, 80% when combined with a mortgage.
Is a home equity loan better than refinancing?
It depends almost entirely on your penalty. A refinance replaces the whole mortgage, so if your current rate is well below market you pay an interest rate differential on the full balance. A second charge leaves the first mortgage untouched and often wins even at a higher rate on the new money.
Do I need good credit for a home equity loan?
For a bank, yes, along with full income documentation. Alternative lenders accept bruised credit and broader income, and MIC and private lenders weigh the equity and your exit plan more heavily than the score. The rate and fees rise accordingly.
What does a home equity loan cost beyond the rate?
A lender fee, a broker fee on alternative and private deals, legal fees, an appraisal and title insurance. On a mid-six-figure advance these usually total a few thousand dollars, and all of it must be disclosed to you in writing before you commit.
Loan-to-value ceilings reflect the lending programs published by the lenders in our directory and are confirmed per file; they are policy, not regulation, and change. Standalone HELOC and combined limits, and prepayment penalty structure: Financial Consumer Agency of Canada. Verified 4 November 2026.
Want to know which route costs less on your file?
When you are ready to do something with these numbers, we will introduce you to a licensed broker who can put the file in front of lenders. Nothing here obliges you to.
