A client approaches Mortgage Agent David with an interest in obtaining a Home Equity Line of Credit (HELOC) on their primary residence in Calgary. The client understands that interest is typically only paid on the outstanding balance. However, what is a key regulatory requirement David must explain regarding the maximum loan-to-value (LTV) for a HELOC?

Question: A client approaches Mortgage Agent David with an interest in obtaining a Home Equity Line of Credit (HELOC) on their primary residence in Calgary. The client understands that interest is typically only paid on the outstanding balance. However, what is a key regulatory requirement David must explain regarding the maximum loan-to-value (LTV) for a HELOC?

Answer options:

• The maximum LTV for a HELOC is 65% of the property's value. ✅ The combined LTV of a HELOC and any first mortgage cannot exceed 80% of the property's value, with the HELOC portion capped at 65%.
• The maximum LTV for a HELOC is 80% of the property's value.
• There are no LTV restrictions on a HELOC, as long as the client can service the debt.

Correct answer: The combined LTV of a HELOC and any first mortgage cannot exceed 80% of the property's value, with the HELOC portion capped at 65%.

Explanation: OSFI Guideline B-20 mandates that the combined loan-to-value (LTV) of a HELOC and any first mortgage cannot exceed 80% of the property's value, and the HELOC portion itself is typically capped at 65% for federally regulated lenders.