Ask a Planner

By Jason Heath, CFP on August 7, 2025
Estimated reading time: 4 minutes

By Jason Heath, CFP on August 7, 2025
Estimated reading time: 4 minutes

A MoneySense reader wants to buy a second property, perhaps using the equity in her primary residence. What should she consider before setting up a HELOC?

I am considering taking out a HELOC loan to buy another property. Is this a wise decision, or would a loan be better? My bank advises me that I can qualify for a $400,000 HELOC.

–Caren

When buying a second property, Canadians can choose from a number of financing options, including a home equity line of credit (HELOC), a mortgage, or a personal loan. Before you decide, it’s a good idea to consider practical matters including interest rates, cash flow, income tax, and more. Let’s dive in.

When you borrow money using a HELOC secured by the value of your home, the interest rate is typically prime plus a small premium of 0.5% to 1%. Today, that would mean an interest rate between 5.45% and 5.95%.

By comparison, variable-rate mortgages are usually offered at a discount to prime of maybe 0.5% to 1%. The interest rates for fixed-rate mortgages are currently in that range, too.

As a result, Caren, there is the potential to save 1% to 2% interest........

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