Turning Your Mortgage Into Assets

Not many are aware that a home mortgage can be turned into an asset builder with the right mindset and know-how. Most people view their mortgage as an obligation or a money pit, not seeing the fact that paying mortgage is similar to building a huge savings fund.

The above is true because the more a homeowners pay towards their mortgage, the bigger their equity becomes. Equity can be turned into cash that can be  used for further growing one’s assets without having to sell one’s home. Below are the common ways of accessing home equity.

Get a Second Mortgage

Do you know that a second mortgage can get you access to as much as 80% of the home equity you’ve built up? That is quite a substantial amount that can be funneled to finance major home renovations (that can drive up your home’s value) or perhaps spend for a much-needed large expense (such as debt consolidation) that can improve your overall finances.

Getting a home equity loan (another term for a second mortgage) may prove to be quite challenging if you do not have good credit.Professional mortgage brokers can help you get one from other lenders if banks decline. The most important thing to remember is that applying for a second mortgage means having two mortgages instead of just one and that both have to be paid on a monthly basis.

Get a Home Equity Line of Credit (HELOC)

Just like a second mortgage, a HELOC is a loan secured by your property but instead of a lump sum, you’ll be given a line of credit that you can use for a specified length of time as long as you do not exceed the approved ceiling amount.

As much as 65% of a home’s value can be tapped for a HELOC. Payment is usually just for the interest for a period of time and once that time is up, the repayment must be done. A HELOC is perfect for paying recurring big expenses such as medical treatment or university tuition.

Get a Mortgage Refinance

A mortgage refinance is a way to overhaul your current mortgage contract and convert it to a mortgage that more manageable for you while also giving you access to your home equity.

Penalties might be incurred for certain reasons and so a refinance isn’t for everyone unless refinancing will result to significant savings in the long run. It is best to talk this through with a mortgage professional to ensure that you’ll be making the right financial decision.

Get a Private Loan

80% is usually the highest percentage of tappable equity you can get access to by going through traditional lenders. If you are in need of more than that, you might be able to get access to as high as 90% of your home equity with a private lender more so if your property is in a desirable location and in good shape.

Are you thinking of tapping your home equity to fund possible investment opportunities? Talk to us at Mortgage Central Canada and we’ll be more than happy to explore possible options for you. Be it about getting a mortgage loan or the things you must be aware of before getting a home equity loan, feel free to contact us soon!


Comparing Rates – Home Equity Line of Credit in Canada

Getting a Home Equity Line of Credit in Canada means tapping into the equity you’ve built in your home through a line of credit. It is a way of utilizing the value of your home that you truly own. Note that it only sounds similar but is not the same as an unsecured line of credit.

HELOC Explained

A Home Equity Line of Credit is a type of revolving loan that is secured by the equity of your home. It is not the same as a home equity loan because a home equity loan is a one-time loan of your home equity that will have to be paid back in full before you can use it again.

A HELOC can be reused again and again as long as you don’t exceed the ceiling amount within the time agreed for your HELOC. Interest rates for a HELOC are more manageable as well because only the exact amount withdrawn gets computed for interest. This means that if your HELOC has a ceiling of $100,000 and you only used up $1,000, you only have to pay interest for the $1,000 you used. As you pay back that $1,000, your ceiling goes back to $100,000. Think of a HELOC like a credit card with a high spending limit that is tethered to the equity of your home.

HELOC Interest Rates

Interest rates for a Home Equity Line of Credit has been made a little bit higher since the Bank of Canada increased its key interest rate to 0.75% on July 12, 2017. This is still easier to manage than interest for credit cards which are more than 10X higher than that.

Those who have a HELOC can expect that their variable interest rates will be a little less predictable but ultimately they will still end up saving upwards of a few hundred dollars a month in interest as compared to more traditional loans.

How to Get a HELOC?

Applying for a HELOC may be a bit tricky if you’ll be doing it on your own or will be approaching big institutions to get one. Requirements vary by lender and some lenders (such as banks) can have very strict requirements.

If you are self employed, have variable income, have a non-perfect credit history, or have other debts, going the bank route may not be the best option for you. A good option is to apply for a Home Equity Line of Credit to private lenders or smaller lenders with the assistance of professional mortgage brokers to ensure that you’ll get higher chances of approval and that all your bases are covered.

If a HELOC is not for you, you can also look into a home equity loan or second mortgage, a private mortgage, or even home refinancing. The key is to ensure that you’re talking to the right people and that you really do your due research to determine what is right for you.

Care for an estimate of rates before you apply for a Home Equity Line of Credit or other possible ways to help you manage your finances better with a loan? Contact Mortgage Central Canada today!