Using a HELOC to boost your financial plan

Of all the borrowing options available to Canadians, a home equity line of credit (HELOC) is one of the most popular. Around one in four Canadians have a HELOC, and in 2024, lending through HELOCs climbed above $170 billion.

But why is the HELOC so popular? And how can it boost your financial plan and help you reach your financial goals faster? Let’s take a look. 

What is a HELOC? And how does it work?

A home equity line of credit allows homeowners to access some of the equity in their home. Lenders typically allow homeowners to borrow up to 65% of the value of their home (including their mortgage balance).

So, for example, if your home is worth $1 million and you owe $300,000 on your mortgage, you could borrow up to $350,000 in a HELOC, if you qualify (your income and debt levels will be examined to decide the amount you qualify for).

Once the HELOC amount is determined by your lender, you can withdraw from it at any time, for any reason, up to the limit. Also, when you make payments to the HELOC, the amount of principal you pay back becomes available again. In this way, a HELOC provides a kind of revolving credit amount, much like a credit card.

Home equity line of credit interest rates tend to fluctuate in line with the lender’s prime rate (which in turn typically fluctuates in line with the Bank of Canada’s overnight or key interest rate). Most lenders’ HELOC rates are the prime rate plus or minus a percentage amount.

Let’s say your lender’s prime rate is 4.95% and their HELOC rate is prime plus 0.5%; the rate you would pay is 5.45%. You can find out more about how a HELOC works here.

Let’s now explore the ways that a HELOC can be used to improve your financial situation, boost your financial plan and help you reach your financial goals faster.

Convenience and flexibility

Arguably the most attractive features of a home equity line of credit are how easy it is to access the funds and the way that you can pay it back over a long period of time. Once the HELOC is set up, the money is available to you to withdraw at any time. You can tap into it for any purpose, without having to apply to your bank and explain what you need the money for.

Having this easy access means that you don’t have to scramble for funds or apply for high-interest alternative borrowing options. You can take your time in paying back the money you borrow from your HELOC, and there are no rigid monthly payment structures.

Use a HELOC to pay for unexpected expenses, home renovations or large purchases

If you need to make a large purchase, you could use your HELOC funds instead of taking out a personal loan. HELOCs typically charge considerably lower interest rates than personal or auto loans, so you could save a lot in interest.

If you don’t have an emergency fund, HELOCs can provide immediate access to money in case an emergency occurs, such as a leaky roof, a broken appliance or car repairs. Rather than paying for these on high-interest credit cards or with a higher-interest personal loan with rigid repayments, you could use funds from your HELOC and pay the money back at your own pace, at lower interest rates.

HELOCs have low interest rates

Because a HELOC is a loan that’s guaranteed against the value of your home (and therefore considered a low-risk loan) interest rates are typically low compared to other lending options. Here’s how a HELOC’s rates stack up against other loans:¹

Consolidating high-interest debt with a HELOC

A home equity line of credit is an excellent way to consolidate your high-interest debt. By using a HELOC to pay off all of your high-interest debts, you’ll:

• Considerably reduce your monthly debt payments.
• Drastically lower the amount you’ll pay in interest.
• Pay off your debt faster.
• Free up more cash so you can save more.
• Potentially retire sooner. 

Find out more about how debt consolidation works here.

Using a HELOC to buy a second home

Some people use the equity they’ve grown in their principal home to help them buy a vacation or rental property. Depending on the amount of equity you have, your income and the location of the second home (rural areas typically have much cheaper property) you could use the funds from a HELOC to either pay for a large down payment or even buy the property outright.

While a HELOC’s interest rate is typically higher than a mortgage’s, the flexibility of making interest-only payments can make it easier to manage. If you rent out the property, you could use some of the income to pay off the principal of the HELOC loan, thereby growing your assets.

Using a HELOC to provide retirement income during a market downturn

When you’re retired and relying on your investments to provide regular income, you should avoid selling any of those investments after they’ve dropped considerably in value.

Let’s say the market dropped by 10%; if you sold investments at this time, that loss would be very difficult to recover from, and this could have a considerable impact on the longevity of your savings. You certainly don’t want to run out of money in retirement.

By borrowing from your HELOC, you can leave your investments alone until they’ve recovered all of their lost value (and the market has always bounced back, historically). Then you can use your investments to pay off the HELOC debt and keep your financial plan on track.

Get strategies for using a HELOC to boost your financial plan

It can be easy to mismanage a home equity line of credit. It can be tempting to use it like an ATM, but then you would end up with debt that you could struggle to pay back.

An IG Advisor can look at your entire financial picture and uncover any HELOC strategies that might work for you. They’ll figure out ways that the IG Home Equity Plan can save you money and improve your cash flow, while also incorporating a manageable repayment plan.

Talk to your IG Advisor today about a HELOC strategy to boost your financial plan and help you reach your goals faster. If you don’t have an IG Advisor, you can find one here.

_{¹ All rates are as of June 2025. Actual rates would depend on the lender, the Bank of Canada’s overnight rate, your income and your credit score.}   

^{Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Advisor.}

^{Mortgages are offered by Investors Group Trust Co. Ltd., a federally regulated trust company, and brokered by nesto Inc. Licences: Mortgage Brokerage Ontario #13044, Saskatchewan #316917, New Brunswick #180045101, Nova Scotia #202507230; Mortgage Brokerage Firm Quebec #605058; British Columbia, Alberta, Manitoba, Newfoundland/Labrador, PEI, Yukon, Nunavut, Northwest Territories.}

^{Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.}