Over the past decade, home equity lines of credit and loans have surged about 170 per cent and now account for 12 per cent of overall Canadian household debt. In comparison, credit cards represent 5 per cent.

According to the Bank of Canada, Canadians continue to use their homes to borrow money. Roughly 65 per cent of personal lines of credit that Canadian banks granted in 2009 were secured by residential collateral, an annual gain of 16.8 per cent.

Why home equity credit is popular
Interest rate charges on secured loans and lines of credit are much lower than for unsecured debt. One major Canadian bank currently charges a fixed five-year rate of 5.69 per cent.

Minimum monthly payments for secured credit products can be limited to interest charges only. Another Canadian bank requires minimum monthly payments of just 2 per cent, lower than the minimum 3 per cent that some credit card issuers charge.

Home equity loans often enable Canadians to borrow higher amounts. If you own $200,000 worth of equity in your property, you may qualify for up to 80 per cent of owned equity ($160,000).

Another major driver for home equity borrowing is the fact that Canadian house prices have more than doubled over the past decade. Higher real estate prices boost available home equity loan amounts. But be careful; lenders like TD Canada Trust determine their home equity limits based on your home's original purchase price and not on current market value.

In 2009, 54 per cent of home equity line of credit owners were age 50 and over. That's an impressive 64 per cent advance since 1999. Older Canadians generally have owned their homes longer and have built up significant equity.

How home equity loans are used
Based on a speech from Agatha Côté, Deputy Governor of the Bank of Canada, Canadians use home equity credit for:

• Household spending, including home renovations ... 50 per cent.
• Paying down other debts ... 30 per cent.
• Financial asset investing ... 20 per cent.

Household spending includes buying second homes; this in turn drives up houses prices. Other consumer purchases include cars, boats and furniture. Canadians also use home equity loans to finance educational courses and to pay for vacations.

Paying down more costly debt represents another major use for low-interest home equity loans.

Major risks
Lower real estate prices and higher interest rates will make home equity loans less available to Canadians.

But the greatest threat to home equity borrowing is an increase in Canada's unemployment rate.

This past December, the Bank of Canada ran a single-factor stress test for a 3 percent rise in Canada's unemployment rate. According to stress test findings, delinquent loans in arrears three months or more would double.

Currently, Canada's unemployment rate is 7.7 per cent, down 3.8 per cent from April 2009. While that's good news for now, an increasingly strong Canadian dollar can reduce exports and force job cutbacks in related industries.

Lesson learned
You shouldn't become overly dependent on home equity credit. The best preventive medicine is to pay down as much debt as possible and ensure you have adequate sustainable income.

In other words, focus on building up the value of what you own in your home -- rather than on how much debt you can acquire based on your home's value.