Tapping home equity is still an uncommon idea for a lot of people although this has been increasingly becoming the norm in the past decade with the increase in home values in Canada. This can be both good and bad. It can be good because not everyone will be wise about spending money they can have easy access to. For these people, not knowing that home equity can be used this way can be good to prevent them from borrowing too much until they go deeper into debt. However, not knowing that home equity can be tapped without selling the home can be bad for people who know how to proceed with caution. These individuals are the ones who only access their home equity if there are compelling reasons and make wise decisions in terms of managing their finances. But wait, what are good and compelling enough reasons to access home equity?
When a homeowner accesses home equity, it means that the homeowner is borrowing against the actual value of the home. While this can be considered as borrowing against one’s own money, note that using more of the home equity means losing money saved up in the form of real estate property. This is why it is so important to spend it wisely. If you’re thinking about using your home equity, then be sure to at least use it for reasons such as the ones shared below.
Paying for Home Improvements
Home improvements add value to the home and can further increase home equity. More so, home improvement that focuses on function can greatly enhance the living experience of the homeowners and will make owning the home much more enjoyable.
Investing in Education
College is expensive. Postgraduate studies, even more so. The thing is, using home equity to pay for college tuition or postgraduate studies is a smart move because better education means possibly getting better jobs that can allow an individual to achieve more in life aside from just getting to a higher income bracket.
Debt consolidation by tapping home equity is a smart way to convert several high-interest loans into an easy-to-manage lower-interest loan. The key is to make sure that the fees needed to access home equity via a second mortgage or HELOC will be worth the savings in the long run.
Saving for Emergency Expenses
Emergency expenses have a way of coming out of nowhere and costing much more than an average person’s savings. By using home equity as savings for an emergency, the homeowner can be sure that they got something saved for a rainy day or when expenses pile up when finances are not in a good state.
Funding Long-Term Investments
Home equity can be accessed to purchase stocks or to use as downpayment for investment real estate. Although using home equity this way carries risks, the rewards are worth it if things are managed appropriately.
With the above said, note that accessing home equity is an individual decision that should be based on several factors. There are many ways to tap home equity and they all have their pros and cons for each specific situation. Contact us if you want to use your home equity soon and we’ll be happy to answer your questions.