Over the past year, Canada’s already booming housing market has seen remarkable increases. Though that this rapid growth may be starting to slow down as the economy opens back up and interest rates start to rise, this is the perfect time for Canadian homeowners to take stock of what all this growth means for them.
The first thing that homeowners should note is the extraordinary amount of capital that an increase in home equity brings. Your house is, after all, an asset, and like any other asset, it can be leveraged to create more wealth. This means that figuring out how to use your new home equity responsibly is essential.
The 3 Best Ways to Use Home Equity
If you don’t want to sell your home, the best way to generate usable income off of rising property prices is by borrowing against your home equity. Because this involves taking on debt, it is best to use this money to generate more wealth in one of the following ways:
- Investing in Renovations and Repairs: Borrowing to increase the value of your home is always a smart thing to do. Putting in an addition, refinishing the bathroom, or installing skylights are all great ways of using equity to generate equity.
- Consolidate Debt: Nothing slows wealth generation like out-of-control liabilities, so if you’re struggling with debt looking for ways to improve your financial situation, using home equity to bundle a number of loans into a single, low-interest payment is the way to go.
- Invest in Property: Real estate has never been a better investment, and home equity can be the first step toward leveraging your property value to purchase more property.
As any investor knows, the best way to increase your wealth is by putting your money to work. Funding renovation projects, managing debt, and using real estate to buy more real estate are all smart, responsible ways of turning your home equity to profitable ends.
How to Unlock Your Home Equity
When it comes to unlocking home equity, there are two main ways to do so: the first is to refinance your mortgage in such a way as to produce a lump-sum cash payment, the second is to take out a second mortgage or home equity loan. In both cases, working with a mortgage broker like Burke Financial that specializes in residential mortgages is the best way to go.
Refinancing is a great option if you are reaching the end of your five-year refinancing period (interest rates are still fairly low, so refinancing before they start going up is a good idea). But if you have recently refinanced your home and don’t want to do so again, taking out an addition mortgage based on your home equity can help you get a large payment at a low interest rate.
The bottom line for Canadian homeowners is that housing is an asset that should be treated as an investment. Instead of sitting on your wealth, harness it to shore up your financial position or to start creating passive income streams you can draw on for years to come.