Investing with a HELOC: Smart Strategy or Slippery Slope?

With rising home values across Canada, many homeowners have built significant equity in their primary residences. One of the most frequently asked questions by these equity-rich homeowners is: “Should I use a Home Equity Line of Credit (HELOC) to invest in real estate?”

Used wisely, a HELOC can be a powerful tool for building wealth. But like any financial strategy, it comes with both rewards and risks. This blog will break down the benefits, the pitfalls, and how to use a HELOC responsibly in today’s market.

What Is a HELOC?

A Home Equity Line of Credit allows you to borrow against the available equity in your home. In Canada, most lenders allow you to access up to 65–80% of your home’s value (minus your mortgage balance). The funds are revolving, similar to a credit card—you can borrow, repay, and reborrow as needed.

HELOCs typically offer variable interest rates, with payments based on what you borrow. You only pay interest on the amount used.

Advantages of Using a HELOC to Invest

1. Low-Cost Access to Capital

   
   

   HELOCs generally offer lower interest rates than private loans or unsecured lines of credit, making them a relatively cheap form of financing.

   
   

2. Flexibility

   
   

   Unlike a mortgage, HELOCs don’t require you to borrow a lump sum upfront. You can draw only what you need for a down payment, renovations, or closing costs.

   
   

3. Speed

   
   

   Once approved, HELOC funds are accessible immediately. This can be critical in fast-moving real estate markets where quick offers matter.

   
   

4. Tax Benefits (If Structured Correctly)

   
   

   If you use HELOC funds to buy an income-generating property, the interest may be tax-deductible. Always consult with your accountant to structure this properly.

   
   

Risks and Drawbacks

1. Variable Interest Rates

   
   

   Since HELOCs are typically tied to the prime rate, your payments can increase with market rate hikes. In 2025’s environment of rate volatility, this risk is real.

   
   

2. No Forced Repayment Discipline

   
   

   Unlike a mortgage, a HELOC doesn’t come with fixed repayment terms. This can tempt some borrowers to overextend or make only interest payments indefinitely.

   
   

3. Risk of Overleveraging

   
   

   It’s easy to access too much credit and take on more debt than your investment returns can support—especially if your rental income is disrupted or the market softens.

   
   

4. Ties Up Equity in Your Home

   
   

   Using a HELOC puts your primary residence on the line. If you can’t repay the borrowed amount, your home could be at risk.

   
   

When Does Using a HELOC Make Sense?

• You have a clear investment strategy (e.g. down payment for a cash-flowing rental, BRRRR project, or renovation).

• You’ve run detailed cash flow and debt service coverage calculations.

• You have strong credit, stable income, and emergency reserves.

• You’re working with a mortgage broker or financial advisor to optimize the setup.

  
  

When It’s Better to Wait

• You’re relying solely on appreciation for returns.

• You’re already highly leveraged or struggling with cash flow.

• You don’t have a concrete plan for using the funds effectively.

  
  

A HELOC should be used as a tool—not a lifeline.

Final Thoughts

A HELOC can be a strategic way to unlock capital and accelerate your real estate investing goals—if used responsibly. It’s not free money, and it certainly isn’t risk-free, but when paired with the right deal and a disciplined approach, it can become a smart financial lever.

At Greenell Capital, we work with investors to evaluate financing strategies like HELOCs and ensure they align with your broader goals. Whether you're buying your first rental or expanding your portfolio, we help you build with confidence—not just debt.