For the past few years, Canada has remained in a hot housing market fueled by low interest rates, supply shortages and strong demand. Rising home values have benefited homeowners, even those who don’t wish to sell their homes. The rise in home equity has made a positive impact on many homeowner’s finances affording them more options to create financial stability and the opportunity to improve their property’s value.
Many economists expect home prices to rise again this year which will bode well for homeowners who have owned property for a number of years. Your house is considered an asset and it can therefore be leveraged to create more wealth which means deciding on how to use your home equity responsibly is essential. In this post, we outline the best ways to use your home equity to obtain a home equity line of credit (HELOC) and the many benefits it provides.
What is a HELOC?
One of the most popular mortgage products on the market today for homeowners is the Home Equity Line of Credit or HELOC. A home equity line of credit or HELOC is a line of credit taken out by a borrower to access the equity in their home. The amount you can access is based on the amount of current available equity in your home, which is determined by subtracting the appraised value of your home relative to any existing mortgages. The more equity you have built up, the larger the line of credit amount you can qualify for.
Whatever your reason for needing to tap into your home equity, HELOC loans are a great solution that allow you to access equity with flexible terms and payment options. One of the biggest advantages of getting a HELOC versus other borrowing options is that you only pay interest on what you have advanced, so you only need to pay for what you use. The ease and convenience of HELOCs have made them a highly popular option in today’s strong housing market.
The Best Ways to Use A HELOC
If you don’t wish to sell your home, one of the best ways to generate usable income off of rising property prices is by borrowing against your home equity. Because this involves taking on debt, it is best recommended to use this money to generate more wealth in one of the following ways:
- Investing in Renovations and Repairs: Borrowing to increase the value of your home is always a smart and practical decision to make. Renovating the kitchen or bathroom, replacing the front door or garage door or even repairing your roof are all excellent ways of using equity to generate equity.
- Consolidate Debt: Being able to tackle a high debt load from multiple creditors means that you can get your finances back on track and start fresh. If you are faced with a mounting debt load and are looking for ways to improve your financial situation, using home equity in the form of a HELOC to consolidate debt into a single, low-interest payment is the way to go.
- Purchasing Property: Have you always considered purchasing a second property but wondered how it could be made possible? A HELOC lending option ensures that you will have the money for the down payment giving you the opportunity to expand your property portfolio.
- Invest in Education: By applying for a HELOC loan, you can gain instant access to fund your child’s education or to further your own education. Having a low interest borrowing option is a way to fast track your needs.
- Business Investment: If you are self-employed, securing the funds needed to enhance your business can be difficult. A HELOC allows you the opportunity to invest in your business and grow your profits.
The Main Reasons to Consider a HELOC
Homeowners can use a HELOC for a variety of purposes. If you are considering borrowing, the following are the main reasons homeowners benefit from HELOCs.
One of the most attractive features of a HELOC is the flexibility. You can borrow what you need as you need it and pay it back at your convenience. You only pay interest on what you borrow and you can make the monthly payments without incurring penalties. Also, you don’t have to reapply, so the money is always there for when you need it.
- Lower Rates
A HELOC is considered a secured loan because it’s based on the equity of your home, whereby other loans like credit cards and bank lines of credit are considered unsecure as they are not linked to a home’s value. Thus, the risk to the lender is lower and the lower interest rate reflects this.
- Higher Limits
HELOCs are designed for those seeking larger credit limits and are ideal for making major purchases. If you have a big project in mind such as a home repair or renovation, a HELOC means you can borrow a larger amount at a low interest rate, making the debt manageable.
Apply For a Home Equity Line Of Credit HELOC with Burke Financial
Essentially, housing is an asset that should be treated as an investment. Instead of sitting on your wealth, harness it to improve your financial wealth now or for generations to come. In today’s strong housing market, the time has never been better to utilize your home equity to fulfill your dreams.
Burke Financial offers HELOCs so you can get the cash you need when you need it. Our team specializes in getting our clients approved for Home Equity Lines of Credit with great rates and terms. Depending on your goals, a Home Equity Line of Credit might be the perfect fit! Get in touch with us today to explore your options.