Equity Take Out Mortgage
What is Equity?
Equity is the difference between the value of your home, and the balance left owing on your mortgage. It is like your home "working" for you while you sleep.
Example; your home is worth $500,000 and your mortgage owing is at $200,000. The amount of your mortgage divided by your value shows you that you have used 40% of your equity. With the new government rules you can go as high as 80% loan to value so you could use up the additional 40% of your home for other investments purposes. You have $200,000 usable equity in your home. Herein lies the power in ownership.
As time goes by, typically the value in your home will go up. This is not a rule written in stone, however over time it should work to your benefit. Ownership x Time = Equity Gains. Whether or not you decide to do anything with your equity is up to you.
Now that we know what equity is, just how do you go about accessing it? What are the benefits to drawing from it?
Rule #1 - do not decide to access the equity out of your home on a rash decision, or on a whim. There are contributing factors that you may not be aware of at the time of your decision.
Firstly, think about what it is that you want the money for. Are you renovating, or adding onto your home? Maybe the kids need braces? Whatever the reason, we can tell you which route is most advantageous for you.
When you draw equity from your home, you may be "interrupting" your current mortgage situation. Depending on the situation, sometimes it may be necessary to get out of your current mortgage, and register a new one. Factors such as; your current interest rate, your payout penalty (if applicable), lawyers fees (if applicable), a new or higher mortgage amount, must be taken into consideration. Perhaps seeking a line of credit secured against your home is the answer?
Talk to us first and let us assist you in providing the professional mortgage advice you need before you proceed. You likely have more than one option.