With how the whole world is trying to cope with the effects of COVID-19 these days, it is still too early to tell how everyone will get through the long-term financial ramifications linked with it. Unemployment is still rising and plenty of people are having a challenging time paying bills and staying afloat in Canada. In our neighbour country below, people are facing unemployment rates of as high as 30% and things are still escalating. How can people recover from COVID-19’s effect on their finances?
The good news is that for homeowners, the money paid towards their mortgage goes to their home equity. The more payments that has been done, the bigger the home equity is going to be. This translates to more than $6 trillion available equity for the 45 million Americans who are homeowners and the Canadian figures are likely to reflect this as well. If you’re a homeowner, now is truly the best time to tap your home equity and make it work for you.
Leverage Your Home Equity
With job loss and businesses closing causing loss of revenue, now is one of the best times to leverage the value that you’ve built up in your home in the form of a HELOC, a second mortgage, or a home equity loan.
You may want to get a HELOC if you will be using the funds from your home equity for small but frequent purchases and expenses, such as bills, medications, and necessities. A home equity loan or a second mortgage can be better choices if you want a one-time access to a huge amount of cash.
HELOC or a Second Mortgage?
A HELOC would be great if you’re after flexibility and want the option of having access to cash but is not sure how much you will need or how often you will need it. It allows you the freedom to take as little or as much of your funds as needed and only charges interest for the withdrawn amount. This will allow you to save a lot of money and ease some of your worries should the lockdowns extend for a few weeks or months longer.
A second mortgage would be great if you coincidentally also have large expenses ahead, such as needing an expensive surgery that is not covered by the usual channels or need to pay for home repairs that can’t be put-off. The interest will be more substantial as compared to a HELOC but you get to enjoy access to almost all of your home equity without having to sell your home.
Unlock Your Home Equity
Know that no matter what option you choose to unlock your home equity, you’ll have to consider multiple pros and cons and it will be best to consult mortgage professionals for you to make a better-informed decision. There are many ways that you can make use of your home equity during COVID-19 and you must weigh your options with an eye towards the future. Contact us at Mortgage Central Canada if you have any questions about using your home equity during a pandemic.