HELOC vs. Refinance in Alberta — Which Way Should You Access Your Equity?
Written by Shawn Selanders | RECA-Licensed Mortgage Broker | 25+ Years Experience | Updated February 2026
You've built equity in your home. Now you want to use it — for renovations, debt consolidation, investing, or something else. The two main tools are a HELOC (Home Equity Line of Credit) and a mortgage refinance. They both tap your equity, but they work very differently.
One gives you a revolving credit line you can draw from as needed. The other gives you a lump sum and restructures your entire mortgage. The right choice depends on how much you need, what you need it for, and how quickly you want to pay it back.
This guide compares both options side by side — the rules, the costs, the math, and the situations where each one wins. I've helped hundreds of Alberta homeowners make this decision over 25 years, and the answer is rarely the same twice.
Why a Broker Matters for This Decision
Your bank will typically offer you THEIR HELOC or THEIR refinance — with their rates and their rules. I compare 40+ lenders and can tell you which option gives you the best rate, the most flexibility, and the lowest total cost for your specific situation.
Sometimes a HELOC is the right call. Sometimes refinancing saves you thousands. Sometimes a combination of both is the best answer. I'll run the numbers for your exact situation — free.
My service costs you $0. The lender pays my fee.
What's on This Page
- HELOC vs. Refinance — Side-by-Side Comparison
- How a HELOC Works
- How a Mortgage Refinance Works
- When to Choose a HELOC vs. a Refinance
- The Math — Real Alberta Examples
- The Combination Option (Readvanceable Mortgage)
- Costs, Penalties & What to Watch For
- Frequently Asked Questions
- Talk to Shawn — Free Equity Assessment
1. HELOC vs. Refinance — Side-by-Side Comparison
| HELOC | Refinance | |
|---|---|---|
| How you get funds | Revolving — draw as needed, repay, draw again | Lump sum — full amount at closing |
| Maximum LTV | 65% standalone (or 80% combined with mortgage) | 80% of home's appraised value |
| Interest rate | Variable (prime + 0.50% typical) | Fixed or variable (typically lower than HELOC) |
| Minimum payment | Interest only on amount used | Principal + interest (mandatory) |
| Prepayment penalty | None — pay back anytime | May apply if breaking mid-term |
| Setup costs | Usually low (appraisal, legal — sometimes waived) | Higher (appraisal, legal, potential penalty, discharge fees) |
| Affects your mortgage | No — sits alongside your existing mortgage | Yes — replaces your entire mortgage |
| Best for | Flexibility, smaller amounts, ongoing access | Large lump sum, lower rate, structured paydown |
2. How a HELOC Works
A HELOC is a revolving line of credit secured by your home. Think of it as a credit card backed by your house — except with dramatically lower interest rates.
The Rules:
- Maximum 65% LTV standalone. If your home is worth $600,000, your HELOC can be up to $390,000 — minus any mortgage balance. If combined with a mortgage under a readvanceable product, the total can reach 80% LTV.
- Variable interest rate. Typically prime rate + 0.50%. As of early 2026, that's roughly 4.95%. Rate changes when the Bank of Canada moves.
- Interest-only minimum payments. You're only required to pay the interest on what you've borrowed. You can pay down principal whenever you want — no penalty.
- Revolving. Pay it down, borrow again. No need to reapply. The credit is there whenever you need it.
- Stress test applies. Even though you might borrow nothing today, the lender qualifies you as if you've used the entire HELOC limit at a higher rate.
- Requires 20%+ equity. You need at least 20% equity in your home to qualify for a HELOC.
The risk: Because interest-only payments are so low, it's easy to carry a HELOC balance for years without paying it down. HELOCs are the largest contributor to non-mortgage consumer debt in Canada. Use one with discipline and a repayment plan.
3. How a Mortgage Refinance Works
A refinance replaces your existing mortgage with a new, larger mortgage. The difference between the old balance and the new balance is given to you as cash. You walk away with a single mortgage, a single payment, and a fresh term.
The Rules:
- Maximum 80% LTV. You can borrow up to 80% of your home's appraised value, minus any existing mortgage balance. The difference is your cash out.
- Fixed or variable rate. Your choice. Fixed gives you predictable payments. Variable may be lower initially but fluctuates with prime.
- Principal + interest payments. Unlike a HELOC, you pay down the balance with every payment. Structured repayment ensures the debt is gone by the end of the amortization.
- New amortization. You can reset your amortization up to 30 years — which can significantly lower your monthly payment (though you'll pay more total interest over the life of the loan).
- Stress test applies. You must qualify at the higher of 5.25% or your contract rate + 2%.
- Closing costs apply. Appraisal fee, legal fees, potential prepayment penalty if you're breaking your current mortgage mid-term.
4. When to Choose a HELOC vs. a Refinance
✔ Choose a HELOC When:
- You need smaller amounts or ongoing access (under $50K)
- You want flexibility — borrow, repay, borrow again
- You don't want to break your current mortgage
- You already have a great mortgage rate and don't want to lose it
- The need is short-term and you'll pay it back within 1–3 years
- You want an emergency fund available without reapplying each time
✔ Choose Refinancing When:
- You need a large lump sum ($50K+)
- You want to consolidate high-interest debt into one low payment
- You want a fixed rate for predictable payments
- Your current mortgage rate is higher than today's rates
- You want a structured paydown — forced principal repayment
- Your mortgage is at or near renewal (no penalty to switch)
5. The Math — Real Alberta Examples
Your Situation:
Home value: $600,000
Current mortgage: $350,000
Equity: $250,000
You need: $80,000 for renovations and debt consolidation
Option A: HELOC
Max HELOC (65% of $600K): $390,000
Minus mortgage: -$350,000
Available HELOC: $40,000
Problem: Not enough. You need $80K but only $40K is available at 65% LTV.
Monthly interest on $40K at 4.95%: ~$165
You'd still need another $40K from a different source.
Option B: Refinance
Max refinance (80% of $600K): $480,000
Minus current mortgage: -$350,000
Cash available: $130,000
More than enough. $80K for your needs, $50K in reserve equity.
New mortgage: $430,000 at 4.39% over 25 years
Monthly payment: ~$2,340 (vs. your current ~$1,900)
The Verdict in This Example:
The HELOC falls short — it can only provide $40K of the $80K needed. The refinance gives you the full $80K (plus more if needed) at a lower interest rate than the HELOC.
If your debt consolidation includes $30K in credit cards at 20% interest, the refinance also eliminates those payments — potentially improving your monthly cash flow even with the higher mortgage payment. Debt consolidation guide →
Every situation is different. If you only needed $30K, the HELOC would win — no need to break your mortgage, no closing costs, instant access. The numbers tell the story. I'll run yours for free.
6. The Combination Option (Readvanceable Mortgage)
There's a third option most people don't know about: a readvanceable mortgage. This combines a traditional mortgage with a HELOC under one roof — and it automatically gives you access to more equity as you pay down your mortgage.
How It Works:
- Your total borrowing is capped at 80% LTV — split between a mortgage portion and a HELOC portion.
- The mortgage portion works like a normal mortgage (fixed or variable rate, principal + interest payments).
- The HELOC portion (up to 65% LTV) gives you revolving access to equity.
- As you pay down the mortgage, the HELOC limit automatically increases — making more equity available without reapplying or refinancing.
- Most major banks and some alternative lenders offer readvanceable products under their own brand names.
Example:
Home value: $600,000
Total facility (80% LTV): $480,000
Mortgage portion: $400,000
HELOC portion: $80,000 available now
After 5 years, you've paid the mortgage down to $350,000 — your HELOC limit automatically grows to $130,000.
You have ongoing, growing access to equity without ever refinancing again. This is especially powerful for homeowners who plan to renovate in phases, invest over time, or simply want a financial safety net.
The catch: A readvanceable mortgage must be with the same lender for both the mortgage and the HELOC. Not all lenders offer these products, and rate competitiveness varies. I compare the options and make sure you're not paying a rate premium just for the convenience of the HELOC.
7. Costs, Penalties & What to Watch For
| Cost | HELOC | Refinance |
|---|---|---|
| Appraisal fee | $300–$500 (sometimes waived) | $300–$500 |
| Legal fees | $500–$1,000 | $800–$1,500 |
| Prepayment penalty | None | Potentially $2,000–$15,000+ if breaking mid-term |
| Discharge fee | N/A (sits alongside mortgage) | $200–$400 |
| Title insurance | $200–$400 | $200–$400 |
| Typical total cost | $500–$1,500 | $1,500–$17,000+ |
The Penalty Problem:
The biggest cost difference is the prepayment penalty on a refinance. If you're breaking a fixed-rate mortgage mid-term, the penalty can be substantial — especially with a big bank using an IRD (interest rate differential) calculation.
Strategy: If your mortgage is within 6–12 months of renewal, it often makes sense to wait and refinance at renewal — zero penalty. I'll calculate whether the cost of waiting exceeds the penalty savings.
Alternatively, adding a HELOC alongside your existing mortgage avoids the penalty entirely — and you can refinance later at renewal when there's no cost to switch.
8. Frequently Asked Questions
Q: Can I have both a HELOC and a mortgage at the same time?
A: Yes — this is extremely common. A HELOC can sit alongside your existing mortgage (in second position) or be combined with your mortgage under a readvanceable product. The total of both cannot exceed 80% LTV, with the HELOC portion capped at 65%.
Q: Does a HELOC affect my credit score?
A: Yes — the HELOC appears on your credit report and the utilization (how much you've drawn vs. your limit) affects your score. A high-balance HELOC can reduce your score. Keeping utilization low and making payments on time helps maintain your credit.
Q: Can I use a HELOC as a down payment for an investment property?
A: Yes — this is a very common strategy. You draw from your HELOC on your primary residence and use those funds as the 20% down payment on a rental property. The HELOC payments will count as a liability on your debt ratios, so you need to qualify for both. Investment property guide →
Q: Is the interest on a HELOC or refinance tax-deductible?
A: It depends on what you use the money for. In Canada, interest is tax-deductible when borrowed money is used to earn income (e.g., investing in income-producing assets or a rental property). Interest on money used for personal expenses (renovations, vacations, debt consolidation) is NOT tax-deductible. Consult your accountant — and if you plan to invest, keep the HELOC funds in a separate account so the interest can be clearly tracked.
Q: Can the lender reduce or freeze my HELOC?
A: Yes. Unlike a mortgage, a HELOC is a demand loan — the lender can reduce your limit, freeze access, or call the balance if your home value drops, your credit deteriorates, or market conditions change. This is rare but it has happened. A mortgage refinance, once funded, cannot be clawed back.
Q: Should I refinance if my mortgage renewal is coming up?
A: If you're within 6–12 months of renewal, that's often the best time to refinance — no prepayment penalty. You switch to a new lender, take out additional equity, and start a fresh term. I can set this up in advance so everything is ready at renewal. Renewal guide →
Q: How much does it cost to get help from a broker?
A: $0. Whether you choose a HELOC, a refinance, or a combination — my service is free. The lender pays my fee.
9. Talk to Shawn — Free Equity Assessment
Not sure which option is right? Call me. I'll tell you exactly how much equity you have, how much you can access through a HELOC vs. a refinance, what the costs are for each, and which one makes the most financial sense for your situation. 15 minutes. Free. No obligation.
HELOC & Refinance Options — Compared For Free
25+ years helping Alberta homeowners access their equity the smart way. Free consultation.
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Email: ShawnSelanders@gmail.com
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Shawn Selanders — RECA-licensed mortgage broker
Your Local Mortgage Professionals — Independent Mortgage Professional
Serving Calgary, Okotoks, High River, Diamond Valley, Foothills County, and all of Alberta since 1999
This page is for informational purposes only and does not constitute financial advice. Mortgage and HELOC approval is subject to lender criteria and conditions. Interest rates, LTV limits, and qualification requirements vary by lender and are subject to change. Tax deductibility of interest depends on the use of funds — consult a qualified accountant. O.A.C. E.&O.E.