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

Direct answer

A Home Equity Line of Credit is a revolving loan secured against your home, so you draw, repay and redraw against your equity. Interest runs only on what is drawn. Federal rules put two ceilings on it, and the lower one binds: the revolving portion cannot exceed 65% of the appraised value, and the mortgage and the line together cannot exceed 80%. Worked example on a $1.5M Vancouver home carrying a $700K mortgage. The 65% ceiling is $975,000, which the $700K mortgage does not touch, because that cap sizes the revolving facility rather than the total debt. The 80% ceiling is $1.2M, and subtracting the mortgage leaves $500,000 of room. So $500,000 is the answer, set by the 80% rule. The common mistake is to subtract the mortgage from the 65% figure and land on $275,000, which is $225,000 short of what the rules actually allow. 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 things to know before signing. A line of credit gives you none of the rate protection a five-year fixed mortgage does. Interest is deductible only where the borrowed money goes into something that produces income, a rental or an investment, and never where it funds personal spending. And most lenders can call the balance in full at any time.