What is a HELOC and how does it work for BC homeowners?

Direct answer

A Home Equity Line of Credit (HELOC) is a revolving credit facility secured against your home. In Canada, HELOCs are capped by federal rules at a maximum 65% loan-to-value (LTV) on the home's appraised value when offered as a standalone product, or up to 80% LTV when combined with an amortizing mortgage in a "readvanceable" structure (the mortgage portion amortizes; the HELOC portion is revolving and re-advanceable as you pay down the mortgage). Worked example on a $1.5M Vancouver home owned with a $700K mortgage outstanding: standalone HELOC max = 65% × $1.5M = $975K, less existing $700K mortgage = up to $275K HELOC available. HELOC interest rates float at the lender's prime rate plus a margin (typically prime + 0.50% to prime + 1.00%), so payments rise/fall with Bank of Canada policy moves. Interest-only minimum payments are typical, but principal repayment is at the borrower's discretion. The OSFI B-20 stress test applies when the HELOC is established or re-amortized: qualifying rate is MAX(contract rate + 2%, 5.25%). Three practitioner cautions: (1) HELOCs DO NOT shelter you from rate moves the way a 5-year fixed mortgage does. (2) interest is tax-deductible only if the borrowed funds are used for income-producing purposes (rental property, investments) — NOT for personal consumption. (3) most lenders can demand repayment in full on a HELOC at any time.