Demand Facility

A demand facility is a loan that the lender can require the borrower to repay in full at any time, on demand — and it is the structure used for most Canadian home equity lines of credit (HELOCs). Unlike a mortgage with a set term, a demand facility gives the borrower no contractual end date to rely on.

How a Demand Facility Works

The credit is typically registered against the home as a collateral charge, and the borrower may draw, repay, and redraw up to an approved limit. Interest is generally charged on the outstanding balance, and payments are often interest-only, so the principal does not fall on a fixed amortization schedule unless the borrower pays it down.

Because the balance is payable on demand, the lender keeps the right to call for full repayment, to stop further draws, or to reduce the limit. The rate usually moves with prime rate rather than being reset at a renewal date, since there is no term to renew.

Why It Matters to a Borrower

The flexibility is genuine, but so is the uncertainty. A fixed-term mortgage is a contract for a defined period; a demand facility is a credit arrangement the lender can call. In practice, lenders rarely demand repayment from borrowers who are current and whose property value has held up, but the right exists in the agreement and is worth reading before signing.

OSFI's Guideline B-20, which sets expectations for federally regulated lenders, places limits on how much of a home's value can be accessed through a revolving HELOC and requires assessment of the borrower's ability to repay. Confirm the current limits and product terms with your lender or on the OSFI website.

Demand Facility Compared With a Fixed-Term Mortgage

Feature	Demand facility (e.g. HELOC)	Fixed-term mortgage
Repayment timing	Payable on demand	Runs for a set term
Payment structure	Often interest-only, revolving	Principal and interest
Rate	Usually variable, tied to prime	Fixed or variable
Cost of early repayment	Generally no penalty	May trigger a prepayment penalty

What to Check Before Signing

Whether the lender can reduce or cancel the limit without notice.
How the interest rate is set and how often it changes.
Whether the facility is readvanceable and how it interacts with the mortgage.
What happens if the property's value falls.

For a fuller walkthrough of how these products behave, see the guide to home equity lines of credit in Canada.

Frequently asked questions

Can a lender demand repayment of a HELOC?

Yes. Most Canadian HELOCs are demand facilities, so the lender can require full repayment at any time under the credit agreement. In practice a demand is uncommon while payments are current and the property value holds, but lenders may freeze further draws or reduce the limit. Read the terms before signing.

Is a home equity line of credit a demand loan?

In most cases, yes. HELOCs are typically structured as demand facilities secured by a collateral charge on the home. That differs from a fixed-term mortgage, which runs for a set period. The demand feature is also why HELOCs usually carry no prepayment penalty for repaying early.

Do demand facilities have prepayment penalties?

Generally no. Because the balance is payable on demand rather than locked into a term, repaying a HELOC early usually does not trigger an interest rate differential or three months' interest charge. Confirm the specifics in your own credit agreement, since individual products and lenders can differ.