Using Your Homes Equity

General William Douglas 21 Nov

Using the equity with-in your home to reduce your monthly payments

Over the last 5 years owners of Real Estate have seen a great increase in their investments, but have also, due to inflation, seen their monthly expenses increase.

The cost of almost every commodity has significantly increased, monthly costs have increased at a far faster pace than regular income streams.

This has led to many Canadians using revolving debt more and more, Credit Cards, Lines of Credit and additional higher interest loans.

Unfortunately what many Canadians do not know is that when revolving credit balances reach over 30% of their balances then this will begin to negatively affect your credit score even if you make regular payments.

“Monthly costs have increased at a far faster pace than regular income streams”

Consolidating this debt into your mortgage is one way to reduce monthly outgoings and the amount of interest you are paying.

This is not the best strategy for everyone but does work in specific cases.

If you would like to discuss your specific situation please do not hesitate to reach out

Second Property. Get ready to make your next property purchase.

General William Douglas 8 Nov

So, you are looking to purchase a second property! Congratulations! This is an incredible opportunity and we are here to help provide you with the keys to success to expand your financial portfolio and ensure stability for the future.

Before you launch into this purchase there are a few things you should know, such as how to purchase a second property by tapping into existing home equity, the differences in requirements for vacation vs. rental or investment properties and who can qualify.

In the case of purchasing a secondary property, most lenders will allow you to borrow money against the equity you have in your current home and use it as a down payment for a second home. Before jumping in, it is important to understand the different financing options to determine which route best suits your circumstances and property goals.

REFINANCING

One option for tapping into your home equity for the purpose of purchasing a secondary property, is to refinance your mortgage. Essentially, mortgage refinancing means getting a reevaluation on your home and then redoing your mortgage based on the current value. This will allow you to tap into the equity your home has built over the years, and pull out the extra funds for a down payment on your secondary property.  Keep in mind, when using some of your current equity, it will increase the principal amount and the interest payments on your mortgage as the mortgage is now refinanced at a higher amount.

HELOC

There is a second option to unlock your home equity, which is through a line of credit or a HELOC, which stands for “Home Equity Line of Credit”. This option allows you to borrow money using the equity in your property, with the property as collateral.

A HELOC serves as a revolving line of credit to allow the borrower to access funds, as needed, letting you utilize as much (or as little) equity as required. HELOC payments are unique as they are interest only payments versus regular mortgages, which have both Principal Interest and Tax added on. Another benefit to utilizing a HELOC is that you will only pay interest on the amount you actually use! This can provide financial breathing room, especially during tight months. That said, if you do choose to pay the interest as well as a portion towards the principle, it can help you pay off the loan much faster.

You can utilize a HELOC by tying it to your existing mortgage or applying for it separately.

In Canada, you are able to borrow up to 65% of your home’s value using this method. However, keep in mind, your HELOC balance AND current outstanding mortgage cannot exceed 80% of your home’s value when added together.

Connect with me today if you want more information about the mortgage process.