As many Canadians report feeling less wiggle room in their paycheques, experts warn there are risks from turning to a home equity line of credit (HELOC) to borrow more money — including losing a home.
According to an Ipsos poll conducted for insolvency firm MNP Ltd. and released Monday, three in five Canadians (61 per cent) say at least half of their income is already committed to bills, debt payments and regular expenses before it arrives, while around one-third (32 per cent) say most of their paycheque is already committed before it arrives.
The data builds on multiple recent reports showing that the crunch on consumers has continued over the first half of 2026, leaving many looking for options to ease the financial pain.
But is borrowing from a HELOC a safe choice for households struggling with the heightened cost of living?
“HELOCs might be cheaper than credit cards, but they require serious collateral: your home,” mortgage expert Clay Jarvis at NerdWallet Canada said in a statement.
“If your financial situation worsens and you can no longer make HELOC payments, you could lose your house.”
A HELOC is a home equity line of credit.
It is essentially a secured loan where one’s home acts as collateral if a borrower can’t pay the loan back. The amount of equity someone has determines the amount of money available for the additional loan.
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And those loan options are getting more common in recent years, with data showing a rise in HELOC balances in Canada in 2025.
According to Equifax data presented in a March report from the Canada Mortgage and Housing Corporation (CMHC), Canadians had $230.9 billion in outstanding HELOC balances in the last three months of 2025, up from $219.4 billion in the first three months of last year.
That’s an increase of more than five per cent.
This also comes as consumer insolvencies in Canada recently hit their highest level since 2009.
“As budgets are getting tighter and things are getting more expensive, people may not have that same safety net that they already had previously in their chequing accounts and their banking accounts, and they may be dipping into that home equity line of savings because they’re already kind of stretched thin,” says licensed broker and mortgage expert Leah Zlatkin at LowestRates.ca.
“Because of the inflationary pressures in day-to-day life, having a home equity line of credit — it’s not really what you should be using it for.”
Earlier this year, a separate report from Equifax showed that mortgage debt levels were hovering close to $2 trillion in 2025, and as CMHC estimates at least 1.5 million households had already renewed their mortgage by the end of 2025, with a million more set to do so in 2026.
Canadian households have faced, or are about to face, comparably higher mortgage interest rates than what they may have found during the COVID-19 pandemic-era lows.
Higher mortgage rates mean those mortgages are becoming less affordable, especially in some of Canada’s largest cities.
The war in the Middle East has accelerated affordability challenges for consumers, in the form of higher gas prices, and warnings that prices for other goods could rise as a result the longer the conflict goes on.
Using a HELOC to free up cash comes at a cost in the form of typically higher interest rates, either separately or as part of a homeowner’s current mortgage, but those rates are usually lower than those offered by credit cards and other lenders.
“Most people gravitate toward HELOCs because of the relatively low interest rate. If cash flow is tight, you’re generally better off paying 5.5 per cent to borrow against your equity than filling the gaps with a credit card that charges 21 per cent,” Jarvis says.
“But you still need a repayment strategy in mind, even if it’s just to cover a HELOC’s interest-only payments.”
Many households with a mortgage may have already been approved for a HELOC, but the interest payments don’t begin until the money is actually withdrawn.
“Basically, the mortgage is the money that you’re borrowing today, and the home equity line of credit is money that’s available to use in the future — should you need it,” Zlatkin says.
“In case of an emergency, it’s much better to have a five per cent home equity line of credit than a 19 per cent credit card.”
Borrowing through a HELOC puts households at risk of losing their homes if they can’t repay the debt, and the higher interest rate that comes with it makes the total debt more expensive and harder to pay off.
If a home loses value, the HELOC balance doesn’t change and must still be repaid upon selling, meaning more of the sale proceeds could go toward paying off the debt and less toward the homeowner.
Zlatkin says these HELOC balances may also be going up because homeowners know they won’t be able to refinance their mortgages, so they instead are withdrawing their HELOC to pay for other needs.
“If you had a home equity line of credits and you use some of that money, but your home’s value has gone down a little bit, there’s no way for you to actually go back to the bank and refinance for more money,” she says.
“Whatever the case may be that you need a little bit of money, for some of those people, it might make sense to use that home equity line of credit instead of trying to refinance.”
— with a file from Uday Rana
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