Home Equity Loans and the Home Equity Line of Credit: What’s Right for You?

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home equity loans, HELOCs

In this article, we will explore the similarities and differences between home equity loans and home equity lines of credit (HELOCs).

Remember that home equity loans and HELOCs are typically used for larger expenses. Looking for a smaller loan? Submit our quick online application here and get access to fast loans no credit check with installment lenders across Canada.

Home Equity Loans

A home equity loan allows you to borrow a specified amount of money against the equity in your home. Unlike a HELOC, you will pay a fixed interest rate. This makes for a more predictable payment schedule and amount.

With a home equity loan, you will receive a one-time lump-sum payment. The maximum amount will depend on the amount of equity you have in your home in relation to the mortgage balance owing.

Also known as second mortgages or add-on mortgages in Canada, home equity loans might be used for large expenses such as home renovation or kitchen remodelling, which are intended to increase the value of your home.

The application process is similar to that for a regular mortgage. A lender will require a proof of income, assets, and debts. A professional appraiser from the lender will appraise your home.

Pros and Cons of Home Equity Loans


  • You can spend the money however you want
  • A lump sum could be beneficial if you need the money all at once for a large expense
  • The loan repayment terms ranges from five to thirty years
  • Competitive interest rates compared to those for credit cards and unsecured personal loans or lines of credit


  • Not as flexible in terms of withdrawing money as a HELOC
  • May carry a higher interest rate than a HELOC
  • There is a risk of losing your home to foreclosure
  • Fees, including appraiser’s fees and legal fees

Home Equity Line of Credit (HELOC)

In contrast to a home equity loan, a HELOC s a revolving credit. It works like your credit card, enabling you repeatedly to borrow against the equity in your home. You are required to pay a variable interest rate.

Just like a home equity loan, a HELOC uses your home as collateral, which carries the obvious risk of losing your home to foreclosure.

You must have a minimum downpayment or equity of 20% in your home.

A lender may also require that you have a good credit score, proof of a stable income, and a debt-to-income ratio within certain parameters.

Unlike a regular line of credit, a HELOC is secured against the equity in your home.

HELOC Pros and Cons

Consider the following pros and cons before you opt for a HELOC.


  • Easy access to available credit
  • The interest rates are often lower than unsecured loans and credit cards
  • You may consolidate your debts, often at a lower interest rate
  • You may boost your credit by being responsible with your HELOC


  • You must stay disciplined and organized with your payments
  • Risk of foreclosure
  • The interest rate is variable – so it may increase

Interest Rates

It’s possible to try to negotiate your interest rates with lenders. During such a negotiation, lenders will consider the following:

  • Your credit score
  • Your income stability
  • Your net worth
  • Your home’s price
  • The relationship you may have with the lender

Do not borrow more than you afford.


Some common fees are as follows:

  • Credit insurance fees
  • Home appraisal or valuation fees
  • Discharge or cancellation fees
  • Legal fees
  • Title search fees
  • Administration fees

Ask your lender about all the fees involved with your HELOC.

Cancelling Your Home Equity Line of Credit

You must pay off your HELOC before cancelling. You can usually cancel within 10 days as long as you provide a written notice.

Check your terms and conditions for the full information. Keep an open and honest line of communication with your lender.


Home equity loans and HELOCs are used for a variety of expenses, typically larger ones. Weigh the pros and cons of each carefully against your needs at the moment. If you need a smaller loan, Crediteck can connect you with Canadian installment lenders. Get Canadian installment loans now!

If you’re interested in a HELOC, try Equity Recharge! Their professionals will be happy to help you with any inquiries. Direct yourself to a brighter financial future with Equity Recharge.

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