If you’re a homeowner in Calgary looking for a flexible way to access funds—whether it’s for renovations, debt consolidation, or unexpected expenses—you’ve likely heard of two common options: the Home Equity Loan and the Home Equity Line of Credit (HELOC). Both options let you tap into your home equity, but they work in very different ways.
At Calgary Equity Loans, we specialize in helping Albertans access fast, flexible financing options based on the value of their home—not just their credit score. That means understanding the difference between these two financial tools is key to making the right choice.
Let’s break down how Home Equity Loans and HELOCs compare, when to consider each one, and how to decide which is the better fit for your financial goals.
What Is a Home Equity Loan?
A Home Equity Loan is a type of second mortgage. It allows you to borrow a lump sum of money based on the equity you’ve built in your home. Equity is calculated as the difference between your home’s current market value and the balance remaining on your mortgage.
Key Features of a Home Equity Loan:
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Lump-sum payout: You receive the entire loan amount up front.
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Fixed interest rate: Your interest rate stays the same over the life of the loan.
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Fixed repayment schedule: You’ll make the same monthly payments until the loan is paid off.
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Secured loan: Your home is used as collateral.
At Calgary Equity Loans, this is one of the most popular lending options we offer. It’s ideal for clients who prefer predictability and want a clear repayment plan.
What Is a HELOC (Home Equity Line of Credit)?
A HELOC is a revolving line of credit, more like a credit card than a traditional loan. You’re approved for a maximum borrowing limit, and you can draw from it as needed over a set period, known as the draw period.
Key Features of a HELOC:
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Revolving credit: Borrow as much or as little as you need, when you need it.
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Variable interest rate: Your rate may change depending on market conditions.
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Interest-only payments during the draw period: Lower initial payments, but higher long-term cost.
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Flexible use: Ideal for ongoing expenses rather than one-time needs.
Banks and credit unions typically offer HELOCs to borrowers with strong credit scores and steady income, but at Calgary Equity Loans, we offer more flexible lending criteria—even if the big banks have said no.
Comparing Home Equity Loan vs. HELOC
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| Payout | Lump sum | As-needed withdrawals |
| Interest Rate | Fixed | Variable |
| Monthly Payments | Fixed | Varies based on balance and rate |
| Best For | One-time expenses, debt consolidation | Ongoing expenses, uncertain costs |
| Approval Factors | Home equity, repayment ability | Strong credit, income stability |
| Term | Typically 5–20 years | Draw period + repayment period |
| Risk Level | Predictable | May increase with interest rate hikes |
When to Choose a Home Equity Loan
You might prefer a Home Equity Loan if:
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You’re tackling a large, one-time expense. Whether it’s a major home renovation, a new roof, or a large medical bill, having the funds in one lump sum makes it easier to plan.
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You want predictable payments. With fixed monthly payments and a locked-in interest rate, there are no surprises. This helps with budgeting and long-term planning.
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You’re consolidating high-interest debt. Many Calgary homeowners use a Home Equity Loan to pay off credit card debt. By consolidating debt into one lower-interest loan, you can reduce your total interest payments and simplify your finances.
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You want a fast, clear path to payoff. Once your loan term ends, it’s done—no ongoing debt or re-borrowing temptations.
When to Choose a HELOC
You might consider a HELOC if:
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Your expenses are spread out over time. A home renovation that will be completed in phases or an ongoing tuition bill can be more manageable with the flexibility of a HELOC.
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You want flexible access to funds. A HELOC allows you to draw only what you need, reducing interest charges on unused funds.
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You plan to repay quickly. Because HELOCs typically start with interest-only payments, they can be a good short-term solution—especially if you’re expecting a lump sum soon, like a bonus or tax return.
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You have strong credit. Since many banks require good credit and income verification, this option is best suited for borrowers who meet stricter lending criteria.
Risks and Considerations
Regardless of the product you choose, both a Home Equity Loan and a HELOC are secured by your property. If you fall behind on payments, you could risk foreclosure. That’s why it’s important to borrow responsibly.
Home Equity Loan Risks:
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Higher upfront interest costs (if paid off early)
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Less flexibility if needs change mid-way through the loan term
HELOC Risks:
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Monthly payments may increase if interest rates rise
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Temptation to borrow more than you actually need
How Much Can I Borrow?
This is where your Loan-to-Value (LTV) ratio comes into play.
Let’s say your home is worth $600,000 and you still owe $360,000 on your mortgage. You have $240,000 in equity.
Depending on the lender and your credit profile, you could borrow up to 80%–85% of your home’s value (minus what you still owe), which in this case could be around $120,000–$150,000.
At Calgary Equity Loans, we evaluate more than just your credit score. We look at the equity in your home, your current needs, and your repayment ability—offering solutions that banks often can’t.
Which One Is Right for You?
There’s no one-size-fits-all answer—but here are a few guiding questions to ask:
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Do I need all the money upfront or in stages?
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Am I more comfortable with fixed or variable interest?
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Is this a long-term investment or a short-term fix?
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Do I have a solid plan for repayment?
If you want a lump sum for a clear, specific purpose (like paying off debt), a Home Equity Loan may be your best choice.
If you prefer the flexibility of drawing funds as needed, especially for ongoing costs, a HELOC might be a better match.
Still unsure? Our team at Calgary Equity Loans can help walk you through your options.
Why Calgary Equity Loans?
We’re not just another lending company—we’re a Calgary-based team committed to helping homeowners like you access the equity you’ve already earned. Here’s what makes us different:
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Fast Approvals: Often in 3 business days or less
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Flexible Lending Criteria: We work with homeowners the banks pass over
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Transparent Process: No hidden broker fees or referral markups
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Personalized Support: We work directly with you and your lawyer to streamline the entire process
Choosing between a Home Equity Loan and a HELOC doesn’t have to be overwhelming. By understanding how each works, you can confidently take the next step in improving your home, consolidating your debt, or simply gaining more control over your finances.
Ready to explore your borrowing options? Connect with Calgary Equity Loans today and let’s find the solution that fits your goals—and your home.
