• What Is Your Home Equity Actually Making You?

  • Do you have equity in your home, but have so far refrained from using that equity to reinvest because you are worried about the potential risk involved? You are not alone!

    Many Canadians refrain from accessing their home equity, purely because equity in homes is considered a safe cash lump sum for the future. What we often forget though, is that whether we one day access our home equity through selling our home, using a reverse mortgage, or using a Home Equity Loan Line Of Credit, we are actually going to loose at least 10% of our home equity anyway.

    Whether it’s advertising and selling costs, interest on home equity lines of credit, or the repayment of equity on the advent of our death as per the condition of a reverse mortgage, we all stand to loose equity.

    home equity

    On the other hand, accessing equity in order to reinvest in further equity building assets or cash flowing properties/investments, can not only compensate for such losses, but help us generate significant profit. Even better, interest on reinvested equity is for the most part tax deductible.

    Better Securing Your Future Through Your Home Equity

    The silly thing? A notable amount of Canadians already access their home equity at some point. Either they are looking to consolidate debts, assist the appreciation of their own home’s value through renovation work, or they are simply looking to extend a line of credit from the ‘bank of mum and dad’ to their not-so financially secure children. In all of the above scenarios though, returns on investment aren’t guaranteed. In fact, people accessing equity in such cases are often simply left with debt.

    Alternatively, people who access directly proportional amounts of their home’s equity in order to invest in rental properties or other types of investments, such as syndicated mortgages, not only stand to make significant gains, but can even write off the interest as tax deductible.

    Of course, the key is to identify and purchase rental properties in areas with consistently high rental demand. Likewise, it’s doubly important to have a rock solid investment strategy in place prior to purchasing. The benefit though, is that with a positive cash flow rental property, investors stand to make not only cash profits, but increased equity at the same time.

    Meanwhile, it isn’t just rental property mortgages, which are tax deductible. Rather, for people managing rental properties from their own home, it is even possible to offset a portion of that home’s property tax if it can be cited as a place where a resident engages in 50% or more of their usual work activities.

    As far as potential future gains go, the question for many people should therefore not be, isn’t investing some of my home equity risky? But rather, can I really afford not to invest given the potential benefits?

    Either way, everyone needs to start somewhere and even if you are just thinking about accessing and reinvesting some of your home’s equity at this point, it’s important to have a trusted adviser on your side who can guide you through how best to do this.

    My name is Amina Mohamed, I’m a licensed mortgage agent and I see it as my professional privilege to advise and assist people just like you. In this case, if you need impartial advice, contact me today by clicking contact in order to arrange a free, no obligation initial consultation.