Many people find that one of the easiest and most affordable ways to access money is through the equity that they have accumulated in their home. This is a very popular option, especially when you have an excellent first mortgage in place.
Using home equity to your advantage
Canadians purchase homes for a variety of reasons. Some want the stability of owning their own home, while others also look at home ownership as an investment vehicle. No matter what the reason, the truth is that home ownership has proven itself to be a good stable investment over time, and one which many Canadians are profiting from.
Here are some of the common reasons you might consider refinancing your mortgage:
- LOWER RATE: The most common reason for people to refinance their mortgage is to get a better deal. But be careful and don’t become fixated on rate alone. When you refinance your mortgage, you also need to consider the cost to break your current term, plus charges and fees for the new mortgage. Make sure you understand the terms and conditions of the contract and make sure benefits of the new term outweigh the costs of breaking your existing term.
- DEBT CONSOLIDATION: Consolidating higher interest debts and loans into one credit facility could save you thousands of dollars in interest AND improve your cash flow; however, there is definitely a right way and wrong way to go about this. When you consolidate your personal debts into your home loan, it’s easy to forget the smaller amounts have been swallowed within the much larger mortgage. Let’s make sure you understand the options available and reallocate the funds so we get to the end goal with maximal interest savings!
- HOME RENOVATIONS: If you have equity in your home, it can make sense to refinance and incorporate the renovation costs into your mortgage to take advantage of a low borrowing rate.
- FLEXIBILITY: A Home Equity Line of Credit (HELOC) is a re-advanceable line of credit secured against your property at a low borrowing rate. It can give you access to interest-only payments, aggressive repayment, access to tax-free funds that you can use for investment purposes, home renovations, a post-secondary education, retirement planning, etc. There are several different types of HELOC’s available through a variety of lenders, we can discuss which would be most suitable for you.
While removing equity from your home can be a good idea, you should do so with caution and fully understand the benefits and possible risks. The best thing you can do is to consult an experienced Mortgage Broker to discuss opportunities to make your home’s equity work for you.