The HELOC is an essential part of the structure for investing in a rental property.
By using a HELOC on the principal residence you can borrow the 20% down payment for the purchase and 100% tax deduct the interest against the rental income. This could save thousands in taxes.
With a proper HELOC you can also take the 20% you borrowed and lock in the rate so you can fix your payment and not worry about increases. There are only a few HELOC’s that have this option and you want to make sure that you get one where the rates are competitive.
The one we suggest is the Manulife One.
The other advantage of the HELOC is that as you pay down the principal portion of the mortgage, your HELOC will increase. So, as you build equity in the HELOC you can purchase another property without having to go through a refi.
The HELOC should also not be confused with a secured Line Of Credit. A secured LOC goes in 2nd position behind your 1st mortgage.
The secured Line of Credit will not increase in size, and you cannot lock in the rate. Typically, we would use this as a temporary solution until your 1st mortgage comes up for renewal.