HELOC Payments Explained: Interest-Only vs Paying It Off

A home equity line of credit (HELOC) usually only requires an interest-only minimum payment. That keeps the monthly cost low, but your balance never goes down unless you pay more.

The formula

Monthly interest-only payment ≈ balance × annual rate ÷ 12.

Example: a $60,000 balance at 6.45% costs about $323 a month in interest. Pay only that for ten years and you still owe $60,000 — having paid roughly $38,700 in interest.

To clear the same $60,000 in 10 years at 6.45%, the payment is about $682 a month. Run your own numbers in the HELOC calculator.

Why your payment changes

HELOC rates are variable, set as the prime rate plus a margin (often 0.5%–1%). When the Bank of Canada moves its policy rate, prime follows and your payment changes the next month. See the full prime rate history to see how far it has moved.

Limits in Canada

• Your mortgage plus HELOC can total up to 80% of your home's value.
• The revolving HELOC part on its own is capped at 65% of the value.

When a HELOC makes sense

• Renovations that add value to the home
• Consolidating high-interest debt — only if you close or stop using the cards (see should I consolidate my debt?)
• An emergency backstop you rarely touch

When it doesn't

• Ongoing spending or lifestyle costs
• If a 2-point rate rise would strain your budget

Read the full HELOC guide and how a HELOC works.