If you’ve owned your home for a few years in Canada, chances are you’ve built up significant equity — possibly without even realizing how much. With home values in many markets having risen substantially over the past decade, many homeowners are sitting on a valuable financial asset.
The question is: are you putting that equity to work?
Using your home equity to purchase an investment property is one of the most common — and potentially powerful — wealth-building strategies available to Canadian homeowners. Here’s how it works.
What Is Home Equity?
Equity is the difference between your home’s current market value and the outstanding balance on your mortgage. For example, if your home is worth $800,000 and you owe $350,000, you have $450,000 in equity. You can’t spend equity directly — but you can borrow against it.
Two Ways to Access Your Equity
Refinancing Your Mortgage: You can refinance your existing mortgage and take out a larger loan than what you currently owe. In Canada, you can generally borrow up to 80% of your home’s appraised value. So on an $800,000 home, that’s up to $640,000 total — meaning if you owe $350,000, you could potentially access up to $290,000 in cash. This cash becomes the down payment on your investment property.
Home Equity Line of Credit (HELOC): A HELOC works like a revolving line of credit secured against your home. You can draw funds as needed up to your approved limit (again, up to 80% of your home’s value minus your mortgage balance). HELOCs typically come with variable interest rates and offer great flexibility for investors who want to move quickly.
💡 Important: Accessing equity means increasing your debt. Make sure your investment plan is realistic and that your overall debt load remains manageable.
Using the Equity as a Down Payment
Investment properties in Canada require a minimum 20% down payment — you can’t use an insured mortgage on a rental property. However, if you’re using equity from your primary home, that equity essentially functions as your down payment.
This means you could potentially purchase an investment property with zero cash out of pocket — just equity. Of course, you’ll be taking on the mortgage on both properties, so cash flow planning is critical.
What Lenders Look At for Investment Properties
- Your total debt service ratios across all properties
- Rental income potential (lenders will typically use 50–80% of projected rent)
- Your credit profile and existing assets
- The type and location of the investment property
- Your experience as a landlord (for some lenders)
Is It the Right Move for You?
Using equity to invest isn’t right for everyone. Before moving forward, ask yourself:
- Is the property likely to generate positive cash flow after mortgage, taxes, and maintenance?
- Can I handle the payments on both properties if there are vacancies?
- Am I comfortable with the responsibilities of being a landlord?
- Have I spoken with an accountant about the tax implications?
Work With a Mortgage Broker First
Before you start browsing listings, talk to a mortgage broker. We can model out exactly how much equity you can access, what an investment property mortgage would look like, and how to structure both mortgages for the best outcome. Getting your financing strategy right from the start is what separates successful real estate investors from those who overextend.
The Ingram Mortgage Team has helped many Canadian homeowners take their first step into investment real estate. If this is on your radar, let’s talk.