If words like ‘equity’, ‘finances’, and ‘leverage’ make you cringe, you’re not alone. According to a recent survey by OnePoll, 20% of people said they would rather spend an hour in jail than discuss their finances. Yikes!
Leveraging your home equity isn’t as cringe-worthy or complicated as it seems.
Your home is your greatest asset and knowing how to leverage it to purchase an investment property can in time generate massive wealth and pay off in handsome dividends!
Do you want to buy a cozy cottage near the lake?
A condo in the city?
A rental property to fix and flip?
Leveraging your equity is the first step to financial freedom and you may even have the resources to get started today!
But first, let’s start with the basics.
What Exactly is Home Equity?
Equity is the value of your property (what it's worth on the market) minus any debt you have on it. In other words, equity is the portion of your home that you actually “own.”
For example: Say you purchased a property worth $200,000 and you put down 20% ($40,000), you really only “own” $40,000 worth of the home.
Your home equity increases when:
- You make monthly payments on your loan (reducing your loan balance increases your equity)
- You make improvements to your home
- Your home value increases because the market is strong
Many homeowners tap into the equity they have built over the years to invest in additional real estate. Purchasing high-value investment properties with your home equity subsequently increases your net earnings as property values increase!
How to Tap Into Your Home’s Equity
With property prices at record highs and interest rates near record lows in the GTA, it may be a perfect time for property owners to take out a home equity loan (HELOC).
A HELOC allows you to borrow against your home’s equity to purchase an investment property and has many advantages including:
- You can withdraw money at your leisure, up to the maximum amount
- The amount of money you can get when it is secured against real estate is significantly more than you could expect on an unsecured Line of Credit
- The interest rate is typically much lower than unsecured lines of credit?
- You can use as much of the credit limit as you like and only pay interest on the amount you use You can claim the interest you pay on a HELOC as a tax deduction
Depending on the market value of your home, your outstanding mortgage balance, and certain other factors (a steady income, good credit score, etc.), you may qualify for a HELOC.
A HELOC is an incredible product for homeowners and can help build your wealth at a much faster rate than other investment methods!
Are you looking to build your real estate portfolio or sell your investment property?
Call me today at 416 903 7653 or email firstname.lastname@example.org. I would be happy to answer any of your questions or concerns about investing!