What is a HELOC and should I get one?
A revolving line of credit secured against your home, at a variable rate above prime, usually available up to a limit combined with your mortgage. Useful for a renovation with a repayment plan, dangerous for anything else.
It is a credit card secured by your house. You draw what you want, pay interest only on what you draw, and the rate floats with prime. Lenders typically allow a combined limit against a percentage of the property's value.
Where it earns its place: a renovation you have quoted and can repay on a schedule, a bridge between closing dates, or an emergency backstop that costs nothing while unused.
Where it does damage: the interest-only minimum makes it easy to carry a balance indefinitely, at a variable rate, secured against the roof over your head. Consumer spending funded this way converts a bad month into a lien.
Two mechanics to check. Whether it is set up as a readvanceable mortgage, which can register a collateral charge and make switching lenders at renewal harder. And whether the lender can reduce or demand the line, which most can.
If you take one, write down what it is for and a repayment schedule before you draw on it.
Next questions
When does it make sense to refinance?
When the interest you save over the remaining term exceeds the penalty plus legal and appraisal costs, or when you need to consolidate higher-rate debt. Do the arithmetic; do not refinance on a feeling that rates look better.
Canada-wide
When is a renovation worth the money?
When you will use it. Very few renovations return their full cost at resale: kitchens and bathrooms come closest, and pools, high-end finishes and garage conversions rarely do. Budget it as consumption, not investment.
Ontario