Can I use a HELOC for the down payment on a rental property?

Often, yes: in Canada, many lenders accept a down payment drawn from a home equity line of credit (HELOC) on a property you already own. A HELOC draw is still borrowed money, so the lender on the rental counts the HELOC payment as a debt, which can reduce how much you qualify for. Whether the interest is tax-deductible is a question for your accountant.

How a HELOC down payment works

You draw on a HELOC secured on your home and use the money as the down payment on a rental. The rental mortgage is a separate loan on the new property. You now carry three things: your home mortgage, the HELOC balance, and the rental mortgage.

With a federally regulated lender, the HELOC's revolving limit is up to 65% of your home's value, and your mortgage plus HELOC together can reach 80% (source: OSFI, checked October 2026). A property you will not live in generally needs at least 20% down. In this plan, the HELOC covers that amount plus the closing costs, which are paid in cash.

A worked example of a HELOC down payment

These are illustrative figures. Your home is worth $1,000,000 and you owe $500,000. The most a federally regulated lender would lend in total is $800,000, leaving up to $300,000 of HELOC room, subject to qualifying.

You are buying a $500,000 rental. At 20% down, you need $100,000, plus closing costs such as land transfer tax. You draw about $110,000 from the HELOC to cover both.

The rental lender will see the $100,000-plus HELOC balance on your credit report and count a payment on it in your total debt service. Lenders calculate that payment in different ways, but the HELOC payment will reduce the room left for the rental mortgage itself.

What the rental lender looks at

• Your total debts, including the HELOC payment, measured at the qualifying rate: the greater of the contract rate plus 2 percentage points, or 5.25%.
• The rent, counted by each lender's own method for rental properties.
• The source of the down payment, documented with HELOC statements.

Banks, credit unions and monoline lenders lend on HELOC-funded down payments regularly. If your existing debts are high, an alternative lender may accept higher ratios, usually at a higher cost.

The risks to weigh

You are borrowing 100% of the purchase: the down payment on your home's equity and the rest on the rental mortgage. If rents fall, the unit sits empty or rates rise, you carry both payments from your own income. HELOCs usually have variable rates and may require only interest, so the balance does not fall unless you pay it down. Plan how you will repay the HELOC.

Interest on money borrowed to earn rental income may be deductible in some cases. Deductibility depends on how the money is used and tracked. Many investors keep the HELOC draw separate from personal spending; your accountant can confirm the treatment before you borrow.

What to do next

To estimate your HELOC room, try the HELOC room tool; results are estimates only, not an offer or advice. Or use our call-me-back form to plan the purchase with us.