Should You Use a HELOC for Renovations?

The pros, cons, and when it makes sense to use a HELOC.

If your “to-renovate” list is longer than your weekend, a home equity line of credit (HELOC) can be a flexible way to fund upgrades without refinancing your entire mortgage. But is it the right move? Here’s how HELOCs work in Canada, the trade-offs, and when they make sense for renovations.

A HELOC is a revolving credit line secured by your home. You borrow what you need, repay, and borrow again. Usually at a variable rate linked to prime. In Canada, you can typically access up to 65% of your home’s value through a HELOC and up to 80% total when combined with your mortgage. The federal regulator outlines the mechanics, costs, and risks, including rate impacts and fees for appraisals and legal registration.

Pros

• Flexible access: Draw funds as you go, pay interest only on what you use.

• Lower borrowing cost: Rates are often below those of credit cards or personal loans.

• Keep your mortgage: Ideal if your current mortgage rate or term is favourable.

• Great for phased projects like: design, demo, and finishings.

Cons

• Variable-rate exposure: Payments rise when rates do.

• Interest-only temptation: Without discipline, the balance won’t shrink.

• Secured debt: Missed payments can put your home at risk.

• Setup costs: Expect appraisal, legal, and registration fees.

Tax note: In Canada, HELOC interest on your principal home isn’t deductible. It may be if funds are used to earn income (e.g., rental or investments) and records are kept.

When it makes sense:
You have strong equity, stable income, and a well-scoped project that improves utility or resale value (think kitchen, bath, or energy upgrades). A HELOC works best when you want phased funding flexibility without breaking your current mortgage.