If you’re a homeowner, you’ve probably heard people talk about using a HELOC to pay off their mortgage faster. And yes — it can work. But it’s not the kind of strategy you want to jump into without a good understanding of the risks and how it actually plays out in real life.

I’ll break it down in simple terms and explain why talking to a mortgage broker before trying this could save you a lot of trouble down the road.

First Things First: What’s a HELOC?

A HELOC (Home Equity Line of Credit) is like a giant credit card tied to your home. You can borrow against the equity you’ve built up, usually at a lower interest rate than a regular line of credit. When using a HELOC to pay down your mortgage, you’re basically borrowing from one account to pay off another — but the trick lies in how you manage your cash flow.

How the Strategy of Using A HELOC To Pay Off Your Mortgage Works

Here’s the general idea: instead of putting your paycheque into your regular bank account, you deposit it directly into your HELOC. Your paycheque immediately reduces the balance you owe, and you use the HELOC to pay your bills throughout the month.

As long as you consistently spend less than you earn, you’ll have extra money each month to chip away at the balance. Plus, because your mortgage balance gets a big payment upfront from the HELOC, you start paying less interest over the life of your loan.

Let’s look at a simple example:

You buy a home for $100,000 with a $20,000 down payment, leaving you with an $80,000 mortgage. You take out a $10,000 HELOC and immediately apply it to your mortgage, knocking it down to $70,000. If you make $5,000 a month, spend $4,000, and have $1,000 left over, that extra $1,000 can go toward paying off the HELOC.

Over time, you’re not just paying down the line of credit faster, you’re saving interest on your mortgage too. Use my monthly payment calculator to get a better idea of how the numbers would work for you.

Pros and Cons of Using a HELOC to Pay Off Your Mortgage

Like any financial strategy, using a HELOC to pay off your mortgage comes with both advantages and potential risks. Here’s a closer look at the pros and cons to help you decide if it’s the right fit for you.

Pros:

• Faster mortgage payoff: By consistently paying down your HELOC, you can cut years off your mortgage term and become debt-free sooner.
  
• Lower interest payments: Putting a chunk of money toward your mortgage early reduces the principal, which lowers the amount of interest you’ll pay over time.
  
• Flexible access to funds: A HELOC lets you borrow, repay, and borrow again as needed — offering more flexibility compared to a traditional loan.
  
• Potential interest savings: HELOC rates are often lower than credit card rates, so if managed carefully, you can save on overall interest costs.

Cons:

• Variable interest rates: Most HELOCs have variable rates that move with the prime rate, meaning your borrowing costs can rise unexpectedly if interest rates go up.
  
• Strict cash flow management required: To make this strategy work, you must consistently spend less than you earn and be disciplined about applying extra money toward the HELOC.
  
• Higher risk of debt: If you don’t manage your spending carefully, you could end up deeper in debt by continually borrowing against your home’s equity.
  
• HELOC rates may be higher than mortgage rates: Even though HELOCs often have low starting rates, they can still be higher than a locked-in fixed mortgage rate, especially in a rising rate environment.

Other Options to Consider

While the HELOC strategy can be powerful, it’s not the only way to pay off your mortgage faster. Depending on your situation, you might also consider:

Mortgage Prepayments. Some mortgages allow you to make extra payments without penalties. Even small extra payments each month can shave years off your mortgage.

Accelerated Payment Schedules. Switching from monthly to bi-weekly payments (or even weekly) means you’ll make a few extra payments a year, helping you pay off your mortgage sooner without a major lifestyle change.

Lump-Sum Payments. When you get a bonus, tax refund, or inheritance, applying it directly to your mortgage principal can have a huge impact on how much interest you pay over time.

Refinancing for a Shorter Term. Refinancing for a shorter amortization period — like 15 or 20 years instead of 30 — can save you a lot in interest. Just keep in mind your monthly payments will be higher.

Why Talk to a Mortgage Broker First?

Before using a HELOC to pay off your mortgage, it’s a good idea to sit down with a mortgage broker. They can look at your full financial picture, help you understand if this strategy makes sense for you, and find the right HELOC product with the best terms.

They can also walk you through alternatives — like refinancing your mortgage — and help you compare the pros and cons. While refinancing isn’t always the right move, it can be a great option if it fits your situation.

Before You Jump Into This Aggressive Financing Option, Talk To Me About Using A HELOC To Pay Off Your Mortgage

Using a HELOC to pay off your mortgage faster can be a smart strategy — but it’s not the right move for everyone. It requires careful budgeting, discipline, and a clear understanding of how fluctuating interest rates could impact you over time.

Before you commit to this approach, it’s important to take a good look at your entire financial situation. That’s where working with a trusted mortgage broker, like me, can make all the difference. I will help you explore all your options, explain the risks, and build a personalized plan that fits your goals. Book a free consultation with me online or call me at 705-315-0516. With the right advice and a solid strategy, you can make confident decisions and move closer to living mortgage-free.