HELOC in Ontario: How a Home Equity Line Charge Works

A lender has offered you a home equity line of credit, and the paperwork mentions a charge registered on your title. It is fair to wonder what that charge covers, whether it ties you to one lender, and what happens when you want to sell or move your borrowing elsewhere.

This article explains in plain words how a HELOC charge generally works in Ontario. Your own charge terms and lender policies control the details, so read them closely and ask questions before you sign.

What a HELOC charge is

A home equity line of credit, or HELOC, lets you borrow against the value of your home as you need money, rather than receiving one lump sum. To secure it, the lender registers a charge against your property on title. Many HELOCs are secured by a collateral charge.

A standard charge secures only the mortgage. A collateral charge can secure several loans with the same lender, such as a line of credit, and it can be registered for more than the mortgage amount, so you can borrow more later without re-registering.

Limits and conditions to know about

With a HELOC you may borrow up to 65% of your home's value. A HELOC combined with a mortgage requires at least 20% equity and must be with the same lender as the mortgage. You must pass a stress test to qualify at a bank, and the lender may change the HELOC interest rate at any time.

These figures are guidance from the Financial Consumer Agency of Canada, and each lender sets its own terms. Because a collateral charge can cover more than one product, ask exactly which of your debts it secures.

Selling your home or switching lenders

If you sell your home you must pay back your HELOC. In practice the balance is paid from the sale proceeds, and the charge comes off title when a valid discharge is registered by the current lender.

If you want to move a HELOC to a new lender, ask the new lender whether it will cover any of the costs. In some cases an Ontario borrower entitled to redeem can require the lender to assign the debt and transfer the mortgage to a third person the borrower names, such as a new lender, instead of discharging it. That right does not apply if the lender is or has been in possession.

How long a lender takes to register a discharge after payoff varies, so build in time and ask your lawyer to follow it up.

Spouses and co-borrowers

If you are married, special rules apply to your matrimonial home. A spouse may not mortgage, refinance or put a HELOC on an interest in a matrimonial home unless the other spouse joins in or consents, has released their rights by separation agreement, a court order authorizes it, or a different property has been designated and registered as the matrimonial home by both spouses.

This still applies after separation if the home was the family residence at the time you separated. A mortgage given in breach of the rule may be set aside, unless the lender acquired it for value, in good faith and without notice that the property was a matrimonial home. A court may authorize the charge if the other spouse cannot be found, is incapable, or is unreasonably withholding consent.

If you sign with others, you become a joint borrower and are equally responsible for repaying the unpaid balance. Disclosure rights for joint borrowers described by the Financial Consumer Agency of Canada apply to federally regulated institutions, not to every lender.

What to do next

• Ask the lender in writing what the charge secures and the maximum amount registered.
• Ask whether the HELOC must be with the same lender as your mortgage.
• Confirm how the interest rate can change and what happens if your home value drops.
• Ask what it would cost and involve to leave or transfer the charge later.
• If you are married or separated, get advice on spousal consent before signing.
• Have a lawyer review the charge terms before you sign.

A lawyer can read the charge terms against your situation and explain the consequences of signing.

Frequently asked questions