Many Toronto and GTA homeowners are sitting on significant home equity, meaning the difference between what their home is worth and what they owe on it. If you want to use that equity to pay off high-interest debt, renovate, help a child with a down payment or invest, there are two main options: a home equity line of credit (HELOC) or a mortgage refinance.
Both let you borrow against your home, but they work very differently. Here’s how to choose.
How Much Equity Can You Access?
Under federal lending guidelines, most lenders will let you borrow up to 80% of your home’s value in total, across your mortgage and any equity products. A HELOC’s revolving portion is generally capped at 65% of the home’s value.
Example: your home is worth $1,000,000 and you owe $500,000. At 80%, your total borrowing limit is $800,000, so you could potentially access up to about $300,000, subject to qualifying.
What Is a HELOC?
A HELOC is a revolving line of credit secured by your home. It works like a credit card with a much lower interest rate: you borrow what you need, repay it, and borrow again.
- Interest: usually variable, tied to prime
- Payments: often interest-only on what you’ve used
- Flexibility: draw funds as needed, and pay only for what you use
- Setup: can often be added without breaking your current mortgage, sometimes as part of a “readvanceable” mortgage
Best for: ongoing or uncertain expenses (renovations done in stages, tuition, an emergency fund) and disciplined borrowers.
Watch out for: interest-only payments mean the balance doesn’t go down unless you pay extra. Rates can rise with prime. And easy access makes it tempting to overspend.
What Is a Refinance?
A refinance replaces your current mortgage with a new, larger one, and you receive the difference as a lump sum.
- Interest: fixed or variable mortgage rates, which are often lower than HELOC rates
- Payments: principal and interest, so you steadily pay the debt down
- Structure: one payment, one rate, one lender
Best for: consolidating high-interest debt into a single lower payment, large one-time costs, and borrowers who want a forced repayment plan.
Watch out for: if you refinance before your term ends, you may pay a prepayment penalty. On fixed-rate mortgages with some lenders this can be substantial. There are also legal and appraisal costs, and you’ll need to qualify under the stress test.
HELOC vs. Refinance: Side by Side
- How you get the money: HELOC, draw as needed · Refinance, one lump sum
- Typical rate: HELOC, variable (prime-based) · Refinance, mortgage rates, fixed or variable
- Payments: HELOC, often interest-only · Refinance, principal and interest
- Penalty to set up: HELOC, usually none if added alongside your mortgage · Refinance, possible if done mid-term
- Max borrowing: HELOC, 65% of value (revolving) · Refinance, up to 80% of value
Timing Matters: Refinance at Renewal
The cheapest time to refinance is usually at renewal, when you can restructure your mortgage without a prepayment penalty. If your renewal is coming up, see our guide: Mortgage Renewal in 2026: Stay or Switch?
If you’re mid-term, we’ll calculate your penalty and compare it to the interest you’d save. Sometimes it’s still well worth it, especially when you’re replacing credit card debt at 20% or more.
Real-World Scenarios
Debt consolidation: $60,000 in credit cards and car loans at high rates? A refinance can roll it into your mortgage at a much lower rate, often freeing up hundreds of dollars a month. The key is not to run the cards back up.
Staged renovation: renovating over 18 months with uncertain costs? A HELOC lets you draw as invoices come in and pay interest only on what you’ve used.
Helping your kids buy: either can work. A HELOC offers flexibility, while a refinance gives a lower fixed rate on a known amount.
Mortgage-free or nearly paid off and retired? If qualifying on income is difficult, a reverse mortgage may be worth exploring. Learn more on our Home Equity page.
What About Second Mortgages?
If you don’t qualify for a HELOC or refinance with a traditional lender, or you’re mid-term with a large penalty, a second mortgage from an alternative or private lender can be a short-term bridge. Rates and fees are higher, so it’s important to have a clear exit plan.
Let’s Find Your Best Option
We’ll look at your home’s value, current mortgage, penalties, income and goals, then show you the real numbers for each option side by side. Learn more about refinancing and home equity, or book a free discovery call.
This article is for general information only and is not financial, tax or legal advice. Mortgage rules, rates and government programs change, so please speak with a licensed professional about your situation. Trilith Mortgages: Paul Oosh, Mortgage Agent, FSRA Licence #M25002936. Brokerage: Breezeful, FSRA Licence #13470.