 |
| Darcy Schanck Financial |
Using your home equity now has never been
so tempting. With a housing market that is steadily gaining strength, home
values are also rising. When that happens, you know that whatever percentage of
equity that you have in your house has grown with it too.
If you intend on using your home’s
equity, that could be done through a home equity loan, a home line of credit
(HELOC), second mortgage or even a complete overhaul of your first mortgage;
depending on the type of mortgage you currently have. In a home equity loan,
you get to take the whole amount immediately and pay it back in installments as
per agreed. In a HELOC, you will apply for the credit once but you do not have
to use the whole amount immediately. What you can do is to get only the amount
that you need and pay it back. The credit will be available just like a credit
card, but with a considerably lower interest rate, wherein you have a borrowing limit that you can access anytime and pay
only based on what you borrowed.
Using your
home’s equity should be done with caution. You have to make sure that you
understand the risks involved. In case your finances turn sour, failing to pay
back the loans you have against your home equity could result in the loss of
your home to foreclosure.
Given that, here are the smart ways that
you can use your home equity without it blowing up in your face.
● When you use it to buy another property for
rental investment purposes.
● When you intend to help finance the education of
your child.
● When it is a matter of life and death.
● When you wish to renovate your home.
● When you want to increase your investment
portfolio.
● When you want to consolidate your debt with a lower interest rate
When you wish to increase cash flow without increasing your debt portfolio.
Although it is a common practice for some
to use it to consolidate their loans. It may seem logical
to use this to pay off your high interest debts but make sure that you address
the real reason why you were in debt in the first place. Do not reload your paid off credit cards, you need to make sure that you don't fall back into the same debt trap, in any case, the smart
way to use home equity is when it will put money back in your pocket.
A home is always a good investment
because it grows in value as times goes on. Although the market may rise or
fall, you can generally assume that the value of your home in the next ten
years will be greater than when you first bought it. It also has the effect of forced savings, since you need to live somewhere regardless of whether you own your home or rent it, it is always better to put equity in your home than in someone Else's.
The forecast is good for Canadian homes
in 2014 as reported in a December 2013 article in CTVNews.ca. Projections done by the Canadian Real Estate
Association predicted that the sales of homes were good in 2013 and it is
expected to grow stronger in 2014. The increase is noted in Ontario and also in
four provinces in the west. According to the report, we have a well-balanced
market even in the urban areas. With a national average of $382,200, we are
currently enjoying an increase of 5.2% from the previous year. The projected
price in 2014 is at $391,100 - which is a modest 2.5% increase. The report
noted that even the low-rise market in Toronto shows some gain in the housing
prices because of the tight supply in relation to a higher demand.
A strong housing market is good because
you know that the value of your home will turn out positively. That is good
news for the equity of your home and it will be more tempting to use it.
Although you have every right to use your home equity as you wish, you need to
be smart about how you plan on using it. It is suggested that you speak to a
professional financial adviser and get educated before you touch your homes equity.
Darcy Schanck Financial
Darcy Schanck, Independent Financial Consultant
"Paving the way to your financing solutions"
Cellular/Direct 416-706-5741
E Fax 1-877-600-9716
Mississauga, Ontario
