# What are the potential risks and how can I mitigate them?

> HELOCs, while convenient, involve risks inherent to revolving credit.

Category: Advanced
Last verified: 2026-02-18
Source: https://ratellow.com/faqs/advanced/what-are-the-potential-risks-and-how-can-i-mitigate-them

## Answer
| Risk                 | Mitigation Strategy                                      |
|----------------------|-----------------------------------------------------------|
| **Overspending**       | Set strict spending limits; track HELOC usage regularly. |
| **Interest Rate Hikes**| Explore fixed-rate options or hedge against rate increases. |
| **Repayment Issues**   | Create a budget and stick to a repayment plan.           |

## Institutional highlights
- Lenders need to manage the risks of HELOCs, making sure you can eventually repay the full amount and watching your credit situation.
- Your lender should reassess your HELOC limit if your home value drops significantly or your financial situation changes.
- The amount you can borrow with a HELOC may be lower if you're seen as a higher-risk borrower or if there are concerns about your property's value.
- Lenders must have enough capital to cover the risks they take when approving mortgages.
- If your mortgage is considered higher risk, your lender should be extra careful.

## Related guide
- https://ratellow.com/guides/heloc-wealth-strategies

## Sources
- LTV Ratio and Loan Type — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017
- Mortgage insurance — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#2.5.1
- 4.1.11 Exposures secured by residential real estate — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/capital-adequacy-requirements-car-guideline-2026