Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

A home equity line of credit can be an emergency lifeline if you’ve lost your job and need cash fast.

Prepare for the possibility of having that lifeline yanked in one way or another as the pandemic’s effect on the economy deepens. To an extent that will surprise a lot of HELOC holders, banks and other lenders have almost unlimited power to change the terms of these popular borrowing vehicles.

Banks have not focused specifically on HELOCs during the pandemic. But speculation about HELOCs has been growing lately, in part because mass layoffs have raised questions about how people will manage their debt loads. There’s also a sense that economic weakness could lead to declining house prices, which in turn would put pressure on lenders to look critically at their HELOC clients.

Story continues below advertisement

HELOCs are actually a smart way to borrow in an emergency – light years better than credit cards. In this low-interest-rate era, plenty of people have dispensed with keeping cash for emergencies in a savings account and instead put their faith in a HELOC. But in a pinch, HELOCs are not like money in the bank.

With HELOCs, you offer your home equity as security and thus get a preferential interest rate. Many are set at the prime rate, currently 2.45 per cent at major banks, plus a small markup of 0.5 to one percentage point. HELOCs let you borrow up to 65 per cent of your home’s value, while the combined debt of your mortgage plus HELOC can go up to 80 per cent of your home value.

Here are some stark facts about HELOCs provided for this column by the federal Financial Consumer Agency of Canada (FCAC), which apply to federally regulated lenders such as banks:

  • The interest rate can be increased: Notice must be provided within 30 days when changes are made to the credit agreement.
  • Credit limits can be lowered: The new limit can be at or just above the current balance owing on the HELOC, or it can be below the current balance and thus require repayment of the differential amount.
  • HELOCs can be recalled: The lender can ask a borrower to repay in full immediately if, for example, the borrower is delinquent on payments, if the borrower experiences an event that endangers their ability to pay or the borrower’s property falls in value to an amount the lender feels is unacceptable.
  • Payment terms can be changed: The standard HELOC requires a minimum monthly payment of interest only, but lenders can require a switch to a mortgage-type loan where payments are a blend of principal and interest.

HELOC balances in Canada totalled about $268-billion as of Jan. 31, according to the Office of the Superintendent of Financial Institutions. Canada Mortgage and Housing Corp. figures from mid-2019 show the average HELOC balance was almost $99,000. A couple of years ago, CMHC reported that there were 3.1 million HELOCs, with about one-third of them untapped.

A 2019 survey by the FCAC highlights the extent to which HELOCs were being used as a financial lifeline well before the pandemic.

Just less than half of HELOC borrowers used the money for home renovations, while 22 per cent used it for debt consolidation (using cheap HELOC debt to pay off higher-rate borrowing such as credit cards), 19 per cent to purchase a vehicle and another 19 per cent to cover day-to-day expenses. Another 14 per cent regarded their HELOC borrowing as an emergency fund. (Respondents were asked to choose all uses that applied.)

People in the lending and credit counselling sectors say banks monitor the financial health of customers by keeping tabs on their credit files. A falling credit score and missed payments are warning signs that could prompt lenders to take action on a HELOC.

Story continues below advertisement

Be mindful of this if your HELOC has a balance on it. If your bank wants to convert your HELOC to a mortgage, the cost of servicing this debt could rise substantially. If your bank capped your limit at the amount you have already borrowed, you wouldn’t be able to access it to generate cash to pay expenses. Demanding repayment of your HELOC is also possible, though considered less likely because it’s so extreme.

Banks are deferring mortgage payments for as long as six months for clients experiencing financial hardship as a result of the pandemic, but it doesn’t look like similar consideration is available for HELOCs.

Zafar Shah of Montreal went to his bank recently to ask about a deferral of payments on a mortgage and HELOC. “With respect to credit lines, the answer was a big fat no,” he said. The rationale was that HELOCs already allow borrowers to make a minimum interest-only payment each month without repayment of principal.

With unemployment skyrocketing during the coronavirus pandemic, personal finance columnist Rob Carrick offers some tips on how to deal with creditors and make a bare-bones budget. The Globe and Mail

Stay informed about your money. We have a newsletter from personal finance columnist Rob Carrick. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies