With the changes in Canadian home prices over the past few years, many people were left with the option of cashing in on their home equity. In Kitchener, home prices had risen over 20% in 2016. Increasing the net worth of many homeowners in the Waterloo region and providing an opportunity for equity borrowing. So, what are the benefits of tapping into home equity? Is it worth it? And, what can these extra funds typically be used for? While the decision to tap into your home’s equity is purely personal, we’ve compiled a list a common reasons people generally use their home equity for.
Considered one of the top reasons people use their home equity funds, home improvements can actually be a good use of home equity funds. As naturally, renovations and improvements increase the value of the home. This is often considered a safe investment. Borrowing money against your home, to increase its value.
Another good use of home equity funds is for investments. This is a great option if you’re likely to get a higher return than the cost of borrowing.
Real Estate: Generally, the top option here is to invest in more real estate. Especially with the rise of real estate value in Ontario, this may be a great option to diversify your portfolio and add a rental property. Of course, there are many things to consider when choosing the right type of investment property to buy.
Business: Another popular reason people tap into their home equity funds is to start a business or finance an existing one. This may be a great option, provided you’ve completed your research and have a strong likelihood to succeed. Again, this may be a great investment choice, provided research and due diligence was performed.
Education: Many people use equity funds to invest in education, either for themselves or their spouse/children. While this is seemingly a great option, you want to consider this, and all options wisely to ensure this is a truly a good long-term strategy. There have been situations where the educational investment didn’t provide a great enough return via job options to ensure that the extra debt was paid off adequately. This can delay retirement and other life goals. Choose wisely.
Many homeowners use their equity for retirement purposes. This option may seem great to get on with life as a retiree, however, it is important to keep in mind that this poses the risk of accruing higher debt as you age. An option that should be considered with caution.
There you have it. Some of the top uses for tapping into home equity. While we are providing this information, we strongly suggest that you consider all of your options wisely and seek professional advice from a reputable financial planner.
At Team Burca Real Estate we are committed to providing clients with excellent service. This includes educating clients on their best options when it comes to Real Estate. As Re/Max agents, we are apart of an organization that sells 1 in every 3 homes sold in Canada. We would love to work with you on your real estate needs. For more information, contact us today!