Wednesday, August 15, 2018
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Reflections-Opinions

Build Your Wealth

By Pamela Sahota, 19 Mar, 2018
  • Build Your Wealth

As a homeowner, there has to be enough equity actually built up in the home to access these funds, and is subject to bank approval. Here are a few options you can consider

 
 
 
Did you know that as a home-owner you can use the equity in your home to build your wealth? Yes, that’s true! Perhaps having access to some extra finances could really be helpful right now. Available to homeowners are excellent options that allow you to leverage your equity without actually selling your home.
 
One of the many things you can use your equity funds for is purchasing an investment property, whether it is a secondary rental producing property or a business you’re looking to purchase. It could be used for those much-needed renovations around the house, or it may be time to start thinking about your children and their post-secondary education. Another great thing you can use the money for is consolidating debt. Maybe you have a credit card that just doesn’t seem to get paid off. Well, now you can pay it in full. 
 
As a homeowner, there has to be enough equity actually built up in the home to access these funds, and is subject to bank approval. Here are a few options you can consider:
 
The first product available is a mortgage refinance. A refinance gives you the option of borrowing against your property’s equity and gives you the flexibility to take advantage of better rates. By refinancing your current mortgage, you can access up to 80 per cent of your property’s value and increase your current loan size. Both fixed rate and variable-rate options are available for all refinances, while the loan would then be repaid back with monthly payments depending on the loan term and rate. 
 
 
For example, Tom and Betty purchased their first home a few years back for $700,000 with a 20 per cent down payment and took out a mortgage of $560,000. Today, the mortgage balance is down to $530,000 and they just received their most recent home assessment and realize their house has gone up in value by $300,000. Shocked at how much their home’s value has gone up, they remembered hearing from friends how they accessed their equity for some renovations around the house. They spoke to their mortgage broker who advised them they could borrow up to $800,000 minus their current mortgage for $530,000. They could now access $270,000 for whatever they needed and they decided to use that money to invest into a vacation home for themselves. 
 
The next product available is a reverse mortgage which taps right into the equity of your home and turns into cash, and lets you enjoy life on your terms. With this type of mortgage product you do not have to make regular monthly payments, instead the loan is to be repaid when the homeowners no longer live in the home. 
 
Home Equity Lines of Credit (HELOC) are also available to homeowners. They are typically obtained on a lower interest rate, which saves you money in the long run. With this option you can borrow up to 65 per cent the appraised value of your property. Considered a revolving loan, you can take or pay back the cash whenever you would like. 
 
Why not see if you’ve got the ability to use your equity for an investment. The great thing is you can really use the funds for your benefit, but using it for everyday expenses is not recommended. Leveraging your equity is gradually becoming an attractive trend in the housing industry. With house prices rising rapidly, the number of people accessing their equity is also growing.
 
ABOUT THE AUTHOR
 
Pamela Sahota is a young mortgage broker working with Dominion Lending Centres First Pacific.

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