" Home Equity Mortgages give you access to money using the equity in your home...
and use it as you see fit. "
Equity is calculated by deducting all outstanding debts on a property against its value. Usually, the appraised or purchase value (whichever is lower) is used to compute for this amount. For example, if the value of a property is $300,000 and the only debt secured on it is a first mortgage of $80,000, then it has equity equal to $220,000. If the outstanding debt is greater than the property value, there is no equity from which to draw upon additional mortgages or lines of credit.
There are two ways equity increases. One is when the value of a property increases. Another is when payments are made against the balance of the mortgage principal. After years of home ownership and paying down mortgages, many Canadians realize significant equities in their homes, especially as these properties have increased values over time. While being "equity-rich" is nice, oftentimes, people do not realize they can actually make extra income and build up better wealth by putting these funds into good investments.
Equity Take-Out (ETO) is increasing the amount of your mortgage through refinancing or getting new loan on a property that is loan/mortgage-free. Aside from putting money in major investments, other most common reasons for doing this are to:
- Pay for home renovations
- Buy another property like a vacation home
- Purchase recreational vehicles like boats, RV's, etc.
- Consolidate or pay off unwanted debt
- contribute to an RRSP account to maximize tax-savings.
Equity Take-Outs can be done by means of:
- Applying for a new mortgage
- Getting a Home Equity Line of Credit or HELOC
- Applying for a Collateral Loan
- Obtaining a Second Mortgage
- Or a combination of any of these types of loans.
Each of these types of equity take-out comes with corresponding costs to the borrower. Some of these types are therefore more expensive to secure than others, but may be more suitable to your long/short-term goals. To determine which one is the best option for you, simply contact us at 1-888-853-8372 or send us email at contact@canadamortgagehub.com.
(It is important to note that borrowing against real estate equity is most recommended when properties values have gone up significantly. At Canada Mortgage Hub, we also make available investment options to help you pay off your mortgage sooner and/or significantly gain more income either passively or with minimal, easily-affordable costs. Call us now at 1-888-853-8372 to find out more information.)
