Mixed HELOC use

Once personal spending touches the same credit line you use for investing, the line is no longer clean. The CRA requires proportional repayment — you can't target the personal portion first. Every payment, and every interest charge, now splits between deductible and non-deductible.

What creates mixed use

Any borrowing from your investment credit line for non-investment purposes creates mixed use. Home renovations, a car purchase, bridging cash flow — once it happens, your credit balance has both deductible (invested) and non-deductible (personal-use) components.

Worked example

You have a $15,000 HELOC balance, all invested (100% deductible). You draw $5,000 for a home repair.

Before: $15,000 invested principal, 0 non-deductible → 100% deductible
After: $15,000 invested + $5,000 non-deductible = $20,000 total → 75% deductible

When your next interest charge arrives, approximately 75% will be deductible and 25% will not. The exact split depends on the time-weighted balance composition during the billing period.

The proportional repayment rule

This is the rule that makes mixed use permanently consequential. From Income Tax Folio S3-F6-C1, paragraph 1.43: when a single borrowing account is used for both eligible and ineligible purposes, repayments reduce both portions proportionally.

You cannot choose to pay down only the personal portion first. If your debt is 75% deductible and 25% non-deductible, a $1,000 principal payment reduces deductible debt by $750 and non-deductible by $250.

Here's what a $1,200 payment looks like when $200 of outstanding interest is settled first:

Credit Payment — $1,200.00

Payment of $1,200.00: $200.00 settles outstanding interest ($150.00 deductible). Remaining $1,000.00 reduces principal proportionally — $750.00 deductible, $250.00 non-deductible.

	Before	Change	After
Total Debt	$20,200.00	-$1,200.00	$19,000.00
Deductible Principal	$15,000.00	-$750.00	$14,250.00
Invested Principal	$15,000.00	-$750.00	$14,250.00
Non-Deductible Principal	$5,000.00	-$250.00	$4,750.00
Outstanding Eligible Interest	$150.00	-$150.00	$0.00
Outstanding Non-Eligible Interest	$50.00	-$50.00	$0.00

This means the non-deductible portion shrinks slowly — and so does the deductible portion. The ratio stays roughly the same with each payment.

Long-term impact

A one-time personal draw permanently changes the composition of your credit line. Even as you pay it down, the proportional rule keeps both portions declining at the same rate. The only ways to shift the ratio are:

New investment borrowing — borrowing more for investing increases the deductible proportion
Paying off the entire balance — then reborrowing exclusively for investment, starting clean
Using a separate credit line — keeping personal borrowing on a different account entirely

Why separate credit lines matter

Many leveraged investors maintain separate credit facilities — one exclusively for investing, one for everything else. This avoids the proportional repayment rule entirely, because each account has a single purpose. It's the simplest way to maximize and protect deductibility.

CRA basis

Income Tax Folio S3-F6-C1, paragraph 1.43, explicitly addresses mixed-use credit: “The flexible approach described in ¶1.42 cannot be applied to the repayment of borrowed money where a single borrowing account… is used for eligible and ineligible purposes.”