All three of these turn the equity in your home into money you can actually use, and the biggest difference is what each one does to the mortgage you already have. A refinance replaces your existing mortgage with a new, larger one, so you end up with a single payment. With a HELOC (a revolving credit that works like a credit card, secured by your home), your mortgage stays exactly where it is and you draw and repay as you go. The third option, a home equity loan, also leaves your mortgage alone and hands you one lump sum that you repay in fixed instalments. In Canada, all three are generally capped at a combined 80 percent of your home’s value, so the ceiling is usually the same no matter which door you walk through.
Start with your goal, not the product
Most homeowners come to me having already picked a product. They will say “I think I need a HELOC,” when what they actually said two minutes earlier was “the credit cards keep creeping up and I am tired of it.” Those are two different conversations, and the second one is the real one.
So before we compare anything, answer three questions honestly. What is the money for? Do you know the exact amount, or will it change over time? How close are you to your renewal date? Your answers narrow this down faster than any comparison chart, because the product should be chosen last, once the goal is clear.
The three tools, defined simply
Equity is the part of your home you truly own. Take what your place is worth today, subtract what you still owe, and that gap is your equity. Each of these three is a way to borrow against that number without selling the house.
A refinance
Refinancing means breaking your current mortgage and replacing it with a new, usually larger one. The difference between the new mortgage and the old balance comes to you as cash. When it is done, you have one mortgage, one rate, and one payment.
A HELOC
HELOC stands for home equity line of credit. You get approved for a limit, you draw only what you need, and the room opens back up as you repay. Interest applies only to what you have actually used, so an untouched HELOC sitting there ready costs you nothing. The rate is usually variable, so it moves as prime moves.
A home equity loan
A home equity loan is the lump-sum version. You borrow a set amount once, then repay it in regular instalments over a fixed term, often at a fixed rate. There is no drawing and redrawing, and the payment is the same every month.
What each one does to your existing mortgage
Here is the part that gets skipped, and it matters more than almost anything else on this page.
A refinance ends your current mortgage. If you locked in a rate you are happy with two years ago, refinancing hands that rate back and you take whatever is available today. Break a fixed term early and you can also face a prepayment penalty, usually calculated as the greater of three months of interest or an interest rate differential.
A HELOC and a home equity loan leave your existing mortgage exactly where it is. Rate, term, payment, all untouched. The new borrowing is registered against the property in addition to what you already have, which is why homeowners sitting on a great rate so often land here.
That single difference decides a surprising number of files. Near your renewal, refinancing costs you very little and the tidy one-payment result is lovely. Years away from renewal with a rate worth protecting, adding alongside usually wins.
What each one costs to set up
Costs are worth knowing before you fall in love with an option, so here is the honest shape of it.
A refinance is the heaviest of the three. Expect legal fees, an appraisal, a discharge of the old mortgage, and possibly that prepayment penalty. The payoff is that you often access the most money and get the simplest result.
A HELOC is usually lighter to set up, and some lenders build one right alongside a new mortgage at no extra cost. Setting up a home equity loan lands somewhere in the middle, with its own approval and registration.
None of these numbers should be guessed at from a blog post, including mine. They vary by lender and by your specific mortgage, and getting the real figures takes one short conversation.
The ceiling almost nobody mentions
Canadian lenders generally let you borrow up to about 80 percent of your home’s value across everything secured against it, and the revolving HELOC portion is capped lower, at roughly 65 percent of the value. Those limits apply no matter which of the three you choose.
Say a home is worth about $700,000, using a nice round illustrative number. Eighty percent of that is around $560,000. If roughly $400,000 is still owing on the mortgage, there is something in the range of $160,000 of accessible room, subject to qualifying. The product you pick changes how you receive that money and how you pay it back. Total room stays about the same.
A quick story to make it real
Picture Sarah, 47, in Simcoe County. Her home has climbed in value more than she has ever stopped to notice, she is carrying two credit cards and a car loan, and her renewal is fourteen months out on a fixed rate she is not attached to.
For her, a refinance fits beautifully. Fourteen months from renewal, the penalty is modest, everything rolls into one payment at mortgage-level interest, and the monthly squeeze eases in a way she can feel.
Change one detail and the answer changes with it. Give Sarah a low rate locked in for four more years and we would leave that mortgage alone and look at a HELOC or a home equity loan instead. Same house, same debt, different timing, different tool. That is exactly why this is a conversation rather than a formula.
Can you use more than one?
Yes, and plenty of homeowners do. A common setup is a refinance that clears the high-interest debt today, paired with a small HELOC left sitting at zero as a backstop for whatever the next few years bring.
Another version is a re-advanceable mortgage, where a mortgage and a line of credit live together and the credit room grows as you pay the mortgage down. Blending gives you the tidy payment and the flexibility at the same time, and it is worth asking about.
How to narrow it down in five minutes
Want one tidy payment, a lump sum, and you are near renewal? Lean refinance. Want reusable access for costs that arrive in stages, and you will manage it with a plan? Lean HELOC. Know your exact number, want a payment that never surprises you, and prefer to leave your mortgage alone? Lean home equity loan.
None of the three is better in the abstract. The best one is whichever gets you to your goal at the lowest real cost with the most breathing room, and working that out on paper together takes far less time than most people expect.
Frequently asked questions
What is the difference between a home equity loan, a HELOC, and a refinance?
A refinance replaces your whole mortgage with a new, larger one and leaves you with a single payment. A HELOC is revolving credit secured by your home that you draw from and repay repeatedly, usually at a variable rate. With a home equity loan you get a one-time lump sum repaid in fixed instalments. The two equity products leave your existing mortgage untouched, while a refinance ends it.
Which one gives me the most money?
Usually a refinance, because you are rebuilding the mortgage from the ground up. All three are still bound by the same general ceiling of about 80 percent of your home’s value across everything secured against the property, so the gap is often smaller than people assume.
Is a HELOC or a refinance better for debt consolidation?
Both can do it well. A refinance suits people who want everything folded into one lower payment and who are close to renewal. Homeowners who want to keep a good existing rate and will follow a clear payoff plan often do better with a HELOC. Comparing the real numbers side by side is the only way to be sure.
Do I lose my current mortgage rate if I take out a HELOC?
No. A HELOC is added alongside your existing mortgage, so your rate, term, and payment stay exactly as they are. Only a refinance replaces your mortgage and gives up your current rate.
Can I get any of these if I am self-employed in Ontario?
Often yes. Self-employed homeowners have more options than they expect, and the paperwork simply looks different. An agent who works with lenders beyond the big banks can usually find a fit even when a branch has said no.
About the author
Lora Fenn, Mortgage Agent Level 1, DLC Yellow Brick Mortgages (Brokerage Licence #13854), Mortgage Maven — a mortgage agent helping when traditional guidelines say no, serving Barrie, Oro-Medonte, Simcoe County, Collingwood, Muskoka and Cottage Country.
Let’s look at your numbers
If you have read this far and still are not sure which of the three fits you, that is completely normal, and it is the easiest part to sort out. Book a free 15-minute equity-and-rate chat and we will map your actual numbers together, calmly and with no pressure. You can also grab my free guide at lorafenn.ca/free-home-equity-guide-for-ontario-homeowners and get comfortable with your options first. Woohoo, this is the fun part.
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