Should I use my home equity to fund my business? (Ontario)

In Ontario, you can often borrow against your home to fund a business, through a home equity line of credit (HELOC) or a refinance, subject to lender approval. The home secures the loan: if the business cannot carry the payments, your home stands behind the debt. Whether the interest is tax-deductible, and how the borrowing should be set up and recorded for that, is a question for your accountant; we do not give tax advice. This page covers the mortgage side: how much room the rules allow, what the payments look like and what a lender can change.

How much room the rules allow

A HELOC is a revolving line of credit secured on your home: you draw, repay and draw again up to a limit. With a federally regulated lender, such as a bank, the revolving portion can be no more than 65% of your home's value, and your mortgage and HELOC together no more than 80%, with anything above 65% on an amortizing portion (sources: OSFI and the Financial Consumer Agency of Canada, checked October 2026).

You also have to qualify. The stress test applies when you refinance or take a HELOC (source: Financial Consumer Agency of Canada, checked October 2026). The stress test is applied to the income lenders count, which for a business owner is often well below what the business brings in. Our page on how lenders count self-employed income explains why.

Illustrative, not a quote. Your home is valued at $900,000 and you owe $480,000 on the mortgage.

1. The overall ceiling: 80% × $900,000 = $720,000 for the mortgage and HELOC together.
2. Room in principle: $720,000 − $480,000 = $240,000.
3. The line's own cap: 65% × $900,000 = $585,000, which does not limit you here.

Room in principle is not an approval. What a lender extends depends on your qualifying income and its own policy, subject to lender approval. The HELOC room tool runs this for your numbers.

What the payments look like

HELOC rates are usually variable and move with the lender's prime rate, and many HELOCs allow interest-only payments. Interest-only payments keep the payment small, but the balance does not fall unless you pay down principal; see the risks of interest-only HELOC payments.

Illustrative, not a quote. You draw $150,000 for the business.

• Every 1 percentage point of the line's rate costs about $1,500 a year in interest ($150,000 × 1%), about $125 a month.
• If prime rises by 0.50 percentage points, the interest goes up about $750 a year ($150,000 × 0.5%).

A refinance puts the money on an amortizing schedule instead: a larger, fixed payment that repays the loan. If you refinance mid-term, the prepayment penalty is usually the higher of three months' interest or the interest rate differential, and your contract governs (source: Financial Consumer Agency of Canada, checked October 2026). Our page on refinance vs HELOC vs second mortgage compares the routes.

What a lender can change

A HELOC is generally a demand loan: the lender can review the limit or reduce it. A reduced limit is the real risk for a business that relies on the line as working capital. A review can come when your finances or the home's value have changed, which may be exactly when the business needs the line. Ask yourself what the business would do if the limit were cut.

The home behind the debt

The business may fail; the debt does not go away when the business fails. Because the borrowing is secured on your home, the lender's remedies run against the home. Business financing that is not secured on your home is a separate conversation with a business lender and your accountant. We arrange mortgages.

Questions to ask before you borrow for a business

• Your accountant: whether the interest can be deducted, and how the borrowing needs to be set up and recorded before you draw.
• The lender: whether the limit can be reviewed or reduced, whether payments are interest-only, and how its rate is set against prime.
• Yourself: if the business earned nothing for a year, could the household carry the payment?

What to do next

Run your numbers in the HELOC room tool. The tool's results are estimates only, not an offer or advice. Or use our call-back form, and we will go through the mortgage side with you, with your accountant's answers in hand.