For most Canadians, owning a home is the single best way to invest in an asset that is guaranteed to increase in value over the long run. So, it only makes sense that Canadian homeowners should want to ensure that asset grows as quickly as possible.
Home values have shot up across Canada over the past decade, and while there are signs the market is slowing down, Canada remains one of the most desirable places in the world to invest in property. But while many homeowners have seen their home equity increase due to market forces, this doesn’t mean you should just leave home equity growth up to the market.
There are many things homeowners can do to increase their home equity (the total amount of a home’s property value owned by the homeowner), but if you are looking for ways to improve your home equity then understating the factors that impact home value is essential.
Here are four of the most significant:
1. Location
Everyone knows the old real estate joke about the three things that matter most when it comes to home value: location, location, location. People want a home that is situated in a desirable neighbourhood and close to amenities like public transportation, parks, and shops.
But in the ever-changing urban landscapes of the twenty-first century, neighbourhoods change quickly. Properties that were considered relatively cheap only ten years ago have skyrocketed in price, especially in places like the Greater Toronto Area —modest detached homes in bedroom communities, for example, have become increasingly sought-after as young professionals and retirees have moved out from the urban centres.
We tend to think of location as being a fixed factor when it comes to property value. But the truth is that as the real estate market grows to accommodate buyer interest, and as new developments and public investment changes the face of a neighbourhood, locations can change their character, becoming more desirable and driving an increase in market value.
If you haven’t checked in on local housing prices recently, you might be surprised to discover that your area has become a real estate hotspot over the past couple of years.
2. Comparative Value
Shopping is always a matter of comparisons, and while location is important, buyers and property appraisers are also going to look at how your home stacks up to the houses around it. Having a home that compares favourably to the other houses around it can boost home equity value considerably.
For example, if every home on your street has a lot of mature shade trees and yours doesn’t, this will impact the value of your home as compared to other properties in the neighbourhood or street.
Here are just a few of the most common features to consider when comparing your home to those of your neighbours:
- Drainage
- Lot size
- Access to natural light
- View
- Proximity to highways
While some of these things are relatively difficult to fix, you can boost your home value and home equity by getting a second mortgage and investing in upgrades that will help your home stand out.
3. Size
A larger house will naturally be worth more than a smaller one, and the total living space of your home is one of the first things buyers and appraisers will look at.
This is especially important in the downtown core of cities like Toronto, where homeowners often invest in properties with an eye to dividing the property into multiple units. A finished basement with a separate entrance can easily become a passive income stream, making the entire home more desirable to buyers who want to rent out part of their home to tenants.
Real estate experts in Toronto have estimated that an additional bedroom can add a lot to a home’s value, so taking out a loan on home equity for the purposes of creating more units through finishing the basement, partitioning the second floor, are building on an addition can be a canny investment.
If you want to increase the value of your home and make it more desirable to potential buyers, spending a little money on expanding the square footage to create more living space will pay dividends.
4. Renovations
Every month seems to bring a new story about a dilapidated home in Toronto selling for prices that would buy a mansion in other parts of the country. In heavily developed parts of the GTA, land is the most valuable commodity, and if your home is in a prime location, your equity is guaranteed to have grown significantly over the past few years.
But that doesn’t mean you should stop investing in your physical property. A home that is in dire need of renovation is always going to be worth less than a home that has been kept in good condition, with the highest-value repairs being:
- Bathroom remodeling
- Replacing windows
- Landscaping
- Deck or porch repair
Renovations that increase home value can be expensive, so you may want to refinance your home through a residential mortgage broker like Burke Financial that specializes in helping homeowners refinance with a lump-sum payment that can be used to cover all kinds of upgrades.
The great thing about owning a house is that you can leverage your home equity through a second mortgage or home equity loan to make improvements that will further increase the value of the asset. Using the resources available to you wisely is one of the best ways to strategically enhance the desirability of your property and ensure that your home equity continues to grow.
If you want to know more about how you can use mortgage refinancing, home equity loans, or second mortgages to invest the equity you’ve built up back into your home, call the residential mortgage experts at Burke Financial today!
