Home Equity Lines of Credit (HELOCs): How to Use Your Home Equity to Build Real Estate Wealth

Home Equity Lines of Credit (HELOCs): A Powerful Tool for Homeowners and Investors

In Manitoba’s evolving real estate market, homeowners are sitting on one of their most valuable financial tools—home equity. Whether you’re a first-time buyer planning ahead, a seller looking to reposition capital, or an investor focused on building a real estate portfolio, understanding how a Home Equity Line of Credit (HELOC) works can unlock significant opportunities.

This article breaks down what equity really is, how HELOCs function in Manitoba, the benefits and drawbacks and how savvy investors use equity to grow wealth through real estate.

What Is Home Equity?

Home equity is the difference between,

• The current market value of your home
  minus

• The outstanding balance on your mortgage and any registered liens

Example:

If your Manitoba home is valued at $450,000 and your mortgage balance is $250,000,

your equity is $200,000 which is 44.44% of the home's value.

Current Home Value – outstanding mortgage balance = home equity

Access a HELOC Calculator here Steinbach Credit Union to find out how much you potentially could qualify for in a Home Equity Line of Credit.

How to Calculate Your Home’s Equity Percentage

Your home equity percentage shows how much of your home you truly own compared to its current market value.

The Formula:

Equity Percentage = (Equity Home Value) × 100

Example: Calculating Home Equity

Home Value: $450,000
Equity: $200,000

Step 1: Divide the Equity by the Home’s Value

To find the ratio, divide the part (your equity) by the whole (your home’s value)

200,000 ÷ 450,000 = 0.4444

Step 2: Convert the Ratio to a Percentage

Multiply the decimal by 100

Percentage = 0.4444 × 100 = 44.44%

Final Answer

A home with $200,000 in equity and a $450,000 market value has approximately 44.44% equity or "you have 44.44% of your home's value in equity". 

Why This Matters

Knowing your equity percentage helps you

• Understand your financial position

• Plan for selling, refinancing, or upgrading

• See how market changes affect your net worth

Equity grows in two main ways,

1. Market appreciation (home values increase)

2. Mortgage paydown (each payment reduces principal)

Equity is not cash sitting in a bank account—but it can be accessed strategically.

What Is a HELOC?

A Home Equity Line of Credit (HELOC) is a revolving credit facility secured against your home.

In Manitoba, lenders typically allow homeowners to borrow, 

• Up to 65% of the home’s value as a HELOC

• Or up to 80% loan-to-value when combined with a mortgage

Unlike a traditional loan

• You only pay interest on what you use

• Funds can be reused as they’re repaid

• Interest rates are usually lower than unsecured credit

Your home’s value

Your lender may determine your home’s value by using

• a home appraisal to determine its market value
• your home’s purchase price

They use this amount, along with your equity, to calculate your loan-to-value ratio.

The Two Main Types of HELOCs

1. HELOC Combined With a Mortgage (Readvanceable Mortgage)

This type of HELOC is tied directly to your mortgage and must be set up with the same lender.

How it works

• Your available credit increases automatically as you pay down your mortgage principal

• Often referred to as a readvanceable mortgage

• Offered by many lenders under different brand names

Best suited for

• Homeowners who want flexible access to funds over time

• Borrowers planning ongoing renovations, investments, or debt consolidation

2. Standalone HELOC

A standalone HELOC is independent of your mortgage.

How it works

• Your credit limit does not increase as you pay down your mortgage

• You may use different lenders for your mortgage and HELOC

• You can qualify even if you don’t have a mortgage

Flexibility advantages

• You can choose how much principal to repay and when

• You can repay the balance at any time without prepayment penalties

Potential drawbacks

• Requires a larger down payment or more equity

• Interest rates are often higher

• Credit limits are fixed unless you reapply

Some buyers even use a standalone HELOC instead of a traditional mortgage, though this approach requires careful planning and strong equity.

HELOCs and Homeownership in Manitoba

For Homeowners

A HELOC can provide flexibility for

• Home renovations or upgrades

• Emergency expenses

• Debt consolidation

• Education or major life expenses

Renovations funded through a HELOC may also increase property value, effectively recycling equity back into the home.

For Buyers

Future-focused buyers often consider

• Purchasing below maximum affordability

• Accelerating mortgage paydown

• Creating equity early to access later

Some buyers structure their mortgage from day one to allow easier HELOC access as equity grows.

For Sellers

Sellers sometimes use a HELOC to

• Improve a property before listing

• Bridge financing between buying and selling

• Access equity without selling immediately in a strong rental market

In tight inventory markets, a HELOC can help homeowners reposition themselves without rushing a sale.

HELOCs for Real Estate Investors: Building a Portfolio with Equity

The Equity Recycling Strategy

Many Manitoba investors use equity from one property to

1. Access funds via a HELOC

2. Use that capital as a down payment on another property

3. Rent the new property to cover expenses

4. Allow both properties to appreciate and build equity

5. Repeat the process

This strategy allows investors to

• Grow without saving large amounts of cash

• Leverage existing assets

• Scale portfolios faster than traditional saving alone

Common Uses for Investors

• Down payments on rental properties

• Renovations to increase rental value

• Short-term financing for flips

• Bridging capital between purchases

The approach—often called equity recycling—allows investors to expand portfolios without relying solely on savings.

Cash Flow Risk for Real Estate Investors

For real estate investors, using a HELOC to purchase or renovate investment properties can amplify both gains and losses. Higher interest rates, rental vacancies, unexpected repairs, or market slowdowns can quickly turn a leveraged investment into a cash flow challenge.

Investors relying heavily on HELOC financing should maintain strong reserves and conservative assumptions.

Benefits of a HELOC

Flexible Access to Capital

Access funds when needed without reapplying for a loan.

Lower Interest Rates

Typically lower than credit cards or personal loans.

Interest-Only Payments

Minimum payments are often interest-only, improving cash flow.

Portfolio Growth

Allows investors to scale using existing assets instead of waiting years to save.

Potential Tax Advantages (for Investors)

Interest may be tax-deductible when funds are used for income-producing purposes (always confirm with a tax professional).

Non-Benefits and Risks to Consider

Market Risk

If property values decline, available equity can shrink.

Over-Leverage

Borrowing too aggressively can strain cash flow, especially if interest rates rise.

Variable Interest Rates

Most HELOCs have variable rates, which can increase monthly costs.

Discipline Required

Easy access to funds can lead to misuse if not part of a clear financial plan.

Your Home Is Collateral

Failure to manage debt responsibly puts your property at risk.

Home Equity Is Not Cash

One of the biggest dangers of a HELOC is the misconception that home equity equals disposable income. A HELOC converts equity into borrowed money that must be repaid with interest.

Using home equity debt for lifestyle spending instead of income-producing assets can slow wealth building and increase long-term financial risk.

HELOCs in Manitoba’s Real Estate Context

Manitoba’s relatively stable housing market, compared to more volatile regions, makes HELOCs attractive—but not risk-free.

Investors who succeed typically,

• Focus on long-term holds

• Stress-test cash flow at higher interest rates

• Maintain conservative loan-to-value ratios

• Work closely with mortgage and real estate professionals

Local Manitoba Real Estate Markets and HELOC Use

Winnipeg

• Strong rental demand

• Ideal for BRRR (Buy, Renovate, Rent, Refinance, Repeat) strategies

• HELOCs often used for basement suites and duplex conversions

Brandon

• Growing population and steady appreciation

• Popular for cash-flow-focused investors

• HELOCs used for multi-unit acquisitions

Steinbach & Winkler

• High owner-occupancy

• Strong demand for single-family rentals

• Equity growth often driven by renovations and new development

Rural Manitoba

• Lower entry prices

• HELOCs used cautiously due to appraisal sensitivity

• Strong potential for long-term appreciation and rental demand

Is a HELOC Right for You?

A HELOC is not a one-size-fits-all solution. It works best for,

• Homeowners with strong equity positions

• Investors with a long-term strategy

• Buyers and sellers who understand leverage and risk

Used responsibly, a HELOC can turn homeownership into a wealth-building engine rather than just a place to live.

Other Ways to Borrow Against Home Equity

HELOCs aren’t the only option. Other products include,

• Home equity loans – Lump-sum loans with fixed payments

• Reverse mortgages – Designed for older homeowners, allowing access to equity without monthly payments

These products differ significantly from HELOCs and are best suited for specific situations.

Qualifying for a HELOC in Canada

To qualify, you must have sufficient equity in your home,

• At least 20% equity for a HELOC combined with a mortgage

• More than 35% equity for a standalone HELOC

You’ll also need to pass a stress test, proving you can afford payments at a higher qualifying interest rate.

What Lenders Typically Require

Before approval, lenders may ask for,

• Proof of home ownership

• Mortgage details (balance, term, amortization)

• A professional home appraisal

• Legal registration of the HELOC against your property

Federally regulated banks must ensure the product is appropriate for your financial situation and clearly explain any risks.

Final Thoughts

Home equity is one of the most underutilized financial tools available to Manitobans. Whether you’re improving your home, planning your next purchase, or building a multi-property investment portfolio, a HELOC—used strategically—can open doors that traditional financing cannot.

The key is understanding both the opportunity and the risk. Without discipline, a HELOC can shift from a wealth-building tool into a long-term financial burden. Always use in an educated and deliberate manner under professional guidance. 

Tara Zacharias, REALTOR®