For most of the Canadians I work with, the US mortgage is not the hard part. In fact, every Canadian I have helped purchase a US rental so far this year has funded at least 70% of the purchase with a foreign national DSCR loan.
More often the tricky bit is getting together the down payment. They can qualify for a DSCR loan on the property easily enough, but they still need to find around 30% plus closing costs and reserves, and they would rather not sell everything they own to do it.
The good news is that the biggest and cheapest pool of money most Canadians have is sitting in their own home. Canadian house prices have climbed for years, and borrowing against that equity is often the cleanest way to fund a US purchase without selling a thing. Let me show you how it works, the product that does it best, and the one mistake that turns a smart move into a stressful one.
Why your Canadian home equity is the obvious place to start
The property itself rarely stops people from investing. The amount of down payment lenders require from foreign buyers is a far more common stumbling block. On a typical 4-bedroom Midwest single family home, a Canadian needs somewhere in the region of $55,000 to $90,000 all in, and I break that down line by line in my guide to how much money a Canadian needs to buy a US rental.
The cheapest way to raise that, for most people, is the equity in their own home. It is secured against the house, so the rate is far below anything unsecured, and you do not have to sell an asset or break your existing plans to get at it. If you have owned your Canadian home for a while, there is a good chance the money for your first US rental is already there.
HELOC vs readvanceable mortgage, and why the second is usually better
A HELOC, a home equity line of credit, is revolving credit secured against your home. You draw what you need, pay interest only on what you have drawn, and repay and redraw as you like. In Canada the line itself is usually capped around 65% of your home's value, and the combined total of your mortgage plus HELOC is capped around 80%. The rate is usually variable.
A readvanceable mortgage is the upgrade. It is a single product that bundles a normal mortgage with a HELOC, and here is the clever part: every dollar of principal you pay down on the mortgage is automatically added to your available line of credit, keeping your total credit at roughly 80% of your home's value. The line grows as you pay the mortgage down, and it sits at your mortgage rate. This is the exact product the well-known Smith Manoeuvre is built on.
For funding a US rental, the readvanceable mortgage usually wins: the credit builds itself as you pay down your home, the rate is typically lower than a standalone HELOC, and it is cleaner to run as a dedicated pot of investment borrowing, which matters for the tax treatment below.
How the money actually flows into your US purchase
The mechanics are simple. You draw the money from your HELOC or readvanceable line, move it into your US entity's bank account, and use it for the down payment, the closing costs, and the reserves the lender wants to see. Getting the funds across the border cleanly has its own steps, which I cover in my guide to moving money from Canada to the US.
The paperwork that trips people up
Here is where I see deals slow down. US lenders have to verify where your down payment came from, to satisfy anti-money-laundering rules. When the money comes from a line of credit, that means providing the loan documents that show the source. It is not difficult, but it takes time, and time is exactly what you do not have once you are under contract. My advice is to pull those documents together early. Keeping the borrowed money in its own clean path, rather than mixing it through several personal accounts, helps both the lender's checks and the tax treatment. The source of funds side is covered in more depth in my guide to how Canadians get a US mortgage.
The double-leverage trap
Now the honest part. When you fund a down payment this way, you are servicing two loans at once: the line of credit against your Canadian home, and the DSCR mortgage on the US property. That is fine when it is done with room to spare, and dangerous when it is done to the limit.
The one thing to remember: a HELOC is borrowing to invest, stacked on top of a mortgage. It works when the property comfortably cash flows and you keep a buffer. It bites if you draw the line to the limit on a variable rate and the property is running tight.
Most HELOCs and readvanceable lines are variable, so their cost moves with the Bank of Canada's rate. Budget for that. The US rental should cash flow enough to carry its own DSCR mortgage on its own two feet, and your home-equity borrowing should be comfortably covered on top, with a cushion left over. Do not draw the line to the maximum just because you can.
Can you deduct the interest?
This is the part that makes the strategy even more attractive, with a caveat. Under the CRA's tracing rule, interest on borrowed money is generally deductible in Canada when the money is used to earn income, and rental income counts. What matters is how the borrowed funds are used, not what asset secures the loan, so interest on money you borrow to buy a rental is generally deductible against the rental income.
The caveat is tracing. Keep the borrowed money in a dedicated facility with a clean path from the line of credit to the property. Mix it with personal savings and the deduction gets muddy. And because your US rental income and your ownership structure both sit across the border, how this actually lands on your Canadian and US returns is not something to guess at. This is a cross-border CPA question, and it connects to the wider picture in my US tax guide for Canadian investors.
This article is general information, not legal, tax, or financial advice. Cashflow Rentals is a real estate consultancy, not a lender, mortgage broker, or tax adviser. Borrowing against your home to invest carries real risk, and interest deductibility depends on your circumstances and how funds are traced. Figures are current as of July 2026. Always consult a qualified mortgage professional and a cross-border CPA before you act.
A real example: how Ronald is funding his second property
One of my clients, Ronald from Ottawa, is buying his second US rental right now, and he is funding the down payment straight from the equity in his Canadian home.
His mortgage is a readvanceable one. As he has paid the balance down over the years, that paid-down amount has become available to re-borrow as a line of credit, at his low mortgage rate. So rather than scrambling to find fresh cash, he is drawing on borrowing power he has already built, at a rate far below anything unsecured, while the US rental's own income services its DSCR mortgage. He is not drawing the line to the limit, and he keeps a buffer. It is not clever or exotic. It just works, which is rather the point.
HELOC vs the alternatives
If you are weighing how to raise the deposit, here is how the main routes compare.
How the main ways to raise the deposit compare| Funding route | Cost | Flexibility | Main risk |
|---|
| Readvanceable mortgage | Lowest, at your mortgage rate | High, line grows as you pay down and revolves | Variable rate, tempting to over-borrow |
| Standalone HELOC | Low, usually prime-based | High, draw and repay as needed | Variable rate |
| Cash-out refinance of your home | Locks a rate on a lump sum | Low, it is a one-time draw | Possible penalty to break your mortgage |
| Cash savings | No borrowing cost | Total | Ties up your liquidity, slow to build |
| Selling a Canadian property | Frees a large sum | One-off | Transaction costs, taxes, you lose the asset |
What to actually do
Size the borrowing conservatively and leave yourself a buffer rather than drawing to the limit. Where you can, use a readvanceable mortgage or at least a dedicated line, so the tracing for both the lender and the taxman stays clean. Get your loan documents ready before you go under contract, so source of funds does not stall the deal. Talk to a cross-border CPA about the interest deduction before you rely on it. And keep the property firmly cash-flow positive so it carries its own mortgage regardless of what your home-equity rate does. The wider process is laid out in my Canadian guide to buying US rentals, and you can size the numbers with the free tools in the foreign investor starter kit.
The bottom line
For most Canadians, home equity is the smartest and cheapest way to fund a US down payment, and a readvanceable mortgage is the best tool for the job. Just respect what you are doing: layering debt on debt. Keep the property cash-flow positive, keep a buffer against rate moves, and trace the money cleanly so the deduction holds up.
Remember, this is a game of probabilities. Borrow in a way that keeps you comfortable when things move against you, not just when everything goes to plan.
