Cash-out refinance vs HELOC: the cheapest way to get the money
To take $60,000 out of your home you can break and refinance (lowest rate, but a penalty mid-term), blend and increase with your lender (no penalty, part old rate), or keep your mortgage and add a HELOC (no penalty, prime-based and interest-only). For our example with $420,000 at 5.39% and 30 months left, the cheapest over five years is blend and extend. Total borrowing is capped at 80% of value and a HELOC's revolving part at 65%.
Three ways, one example
| Route | Rate | Penalty + fees | Cost |
|---|---|---|---|
| Break and refinance now | 4.58% | $11,765 | $112,992 |
| Blend and extend | 4.93% | $1,900 | $111,192 |
| Keep it, add a HELOC | 5.20% | $1,650 | $114,331 |
The HELOC is priced at prime (4.70%) + 0.5 and assumed interest-only; the refinance uses the big-bank penalty method and our fee estimates. Change any of it on the calculator.
The limits
All mortgages and lines combined can't exceed 80% of the appraised value (Bank Act s. 418), and a HELOC's revolving part can't exceed 65% (OSFI B-20). You qualify for either at the stress-test rate. Revalued.ca shows how much room your value gives you and what happens if the appraisal comes in low.
How to choose
- Big penalty, short need: HELOC.
- Small penalty (variable or near renewal), long need: refinance.
- Want to stay with your lender: ask for a blend-and-increase quote.
Frequently asked questions
Is a HELOC cheaper than refinancing?
Often mid-term, because it avoids the prepayment penalty. Over long periods a refinance's lower fixed rate can win, and a HELOC's rate moves with prime.
How much equity can I take out?
Up to 80% of the appraised value minus everything you owe; a HELOC on its own up to 65%. Revalued.ca works through it with your value.
Primary sources
- Justice Laws — Bank Act, s. 418: 80% limit on uninsured residential loans (including refinances) (effective September 1, 2026). Checked .
- OSFI — Guideline B-20: Residential mortgage underwriting (HELOC limit 65% of value) (effective October 31, 2017). Checked .
- Financial Consumer Agency of Canada — Borrowing money using home equity (80% / 65% limits, fees, risk to your home) (effective October 15, 2025). Checked .
- Bank of Canada — Target for the overnight rate (series V39079): 2.50% from October 29, 2026 (effective October 29, 2026). Checked .