Leverage Calculators
HELOC investment strategy.
Analyse borrowing from your HELOC to invest in the market. Calculate the spread between investment returns and after-tax borrowing costs, breakeven points, and net benefit over time.
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Understanding HELOC investment leverage
A HELOC investment strategy borrows against your home equity to invest in income-producing assets. The CRA allows interest on money borrowed to earn investment income to be deducted (line 22100), so the effective borrowing cost is reduced by your marginal tax rate. A positive "spread" between investment return and after-tax HELOC cost compounds over time.
Key risks: rising HELOC rates flip the spread negative; market downturns hurt the portfolio while the loan balance stays the same; sequence-of-returns risk hits hardest early; CRA may challenge deductibility for non-dividend-paying growth stocks.
TNAADO Inc. · Toronto
The interest is deductible only if the money is invested
Borrowing against home equity to invest can turn a personal, non-deductible debt into a deductible one, but deductibility follows the use of the funds rather than the security behind them. Interest on money borrowed to earn income from a business or property is deductible. Interest on the same HELOC drawn for a renovation is not. Every dollar has to be traced and documented, because the CRA is entitled to ask which was which.
The mistake people make. Mixing purposes inside one account. The moment investment draws and personal draws share a HELOC, the deductible fraction becomes difficult to defend, so use a separate sub-account for the borrowed-to-invest portion. The larger risk is structural: a variable rate on the loan set against an uncertain return on the portfolio, secured by the house, is leverage working in both directions.
Disclaimer
Educational estimates only. Leveraged investing can lead to losses larger than your original capital. Consult a licensed financial advisor and tax professional.