Homeowners are lucky to own the roof over their heads. In Toronto, about half of all households rent their home. Once their rent money is gone, renters never see it again.
However, if you’re making your monthly mortgage payments, you can leverage the capital you’re building up to access cash or credit at a low-interest rate. It’s good to be a homeowner!
Let’s look at some of the best ways to leverage your home’s equity to stabilize your finances, free up money for a big purchase or investment, or use it for whatever reason you can think of.
Home Equity Loan
Homeowners can use the equity they’ve built up in their mortgage payments as collateral for a loan. The property’s current market value will be appraised by an impartial inspector. The more equity you’ve built up, the better the terms are likely to be.
A home equity loan is often perfect for people struggling to meet monthly payments because it grants them access to a lump sum of money at a lower interest rate. Typically, homeowners use these loans to consolidate multiple existing debts into one singular payment, improving the health of their long-term finances.
However, you’re free to use the borrowed money however you want! Some homeowners use it for essential renovations or to pay for things like education or even another investment property.
Your level of debt, income, or credit history is irrelevant — a good mortgage brokerage can help you access up to 85% of the equity in your home. Just remember that a home equity loan is not meant to be used lightly; if you miss a payment, you could risk losing your home.
Talk to a professional mortgage brokerage about various home equity loans, like refinancing your home’s mortgage or about alternative ways to utilize your home financially.
Home Equity Line of Credit (HELOC)
Some homeowners need flexible financial support rather than one fixed sum with a fixed interest rate. Thankfully, homeowners can leverage their home’s equity to get a favourable line of credit.
In this arrangement, the homeowner only pays interest on the money they borrow. The terms have more wiggle room, and a professional mortgage brokerage can help whatever your needs happen to be.
People often use a HELOC to pay for sudden expenditures, like a new roof or to repair a flooded basement. It can also unlock needed funds for things like a new car, education, and other investments. It’s your call! But failing to make HELOC payments present the same risks involved with not paying back a home equity loan, so it shouldn’t be treated like a credit card, not that you should make those payments lightly, either.
Owning a home is a tremendous responsibility. The upfront cost is enormous, requiring all kinds of purchases along the way. Remember these tips about making the most from the equity you’ve built up, and speak to a mortgage broker today about which option suits you best.