More Canadians are using their home equity now for financial relief and it is not just because some people are struggling due to the COVID-19 pandemic. Quite a number of people are using their home equity to buy second homes and to fund investments while taking advantage of favourable terms that are available these days.
Using one’s home equity to borrow money come in many forms. As a homeowner, you can tap your home equity with the use of a HELOC, a second mortgage, a mortgage refinance, and a reverse mortgage. These options for home equity borrowing allow Canadians to withdraw money temporarily from the accumulated value that they built in their property without having to sell their property. For example, a reverse mortgage gives borrowers a lump sum that they do not have to repay but just gets deducted when they sell their home. There is also a home equity loan that grants borrowers a certain lump sum that has to be paid in monthly installments. A HELOC gives borrowers access to a line of credit that can be reused until the date specified in the payment terms. And lastly, borrowers can choose to refinance their mortgage which can give them access to some extra cash if they applied for it at a favourable time.
Borrowing from one’s home equity gives the homeowner access to cash that they otherwise won’t have in a way that doesn’t overly burden them financially. Although borrowing with home equity comes with fees, requirements, interest, and more, this way of accessing cash is friendlier to the pocket than borrowing with unsecured loans or using other means such as maxing out one’s credit cards.
Borrowing with Home Equity Now
According to the latest industry data, lenders saw an increase of 14% to 200% when it comes to the various forms of borrowing using home equity between November 2019 and November 2020. The same industry experts report that they see this trend continuing this year because the low-interest rates for 2021 make conditions favourable for borrowers.
The demographics are changing a lot too. Using home equity for cash is no longer seen as mostly for seniors who are struggling. Borrowers these days tend to be homeowners who are doing great with their finances and are simply looking for ways to grow their wealth and make their money work for them better with the help of smarter financial planning.
With the above said, know that home equity borrowing is not new. This is a financial norm that has been growing stronger for the past 50 years as its own industry. People are more open now to using their home equity to give them more elbow room when it comes to financial decisions. It should be mentioned as well that with recent increases in property values in almost all of Canada, homeowners are simply wanting to enjoy the fruits of their wise investing decisions in the past. When used wisely, tapping one’s home equity can make some people more financially stable and in some cases, grow even wealthier!
Are you looking for ways to gather funds for your business projects or perhaps you are looking for more spending freedom? Contact us and we will be happy to discuss how using your home equity can do that for you!