Making today’s market values work for you.
Despite the news reel that’s full of reel estate doom and gloom, I don’t believe the sky is falling. But even in a light drizzle, isn’t it nice to have a reliable umbrella at your disposal?
With all signs pointing to a dip in Canadian property values in the coming few years, we hear from homeowners every day who are concerned about how these shifts will affect their wealth. But while it is smart to be diligent and set yourself up for long term financial success no matter the economic outlook, there’s no need to panic. In fact, now is actually a great time for Canadian homeowners (who still hold record high equity in their properties) to take advantage of today’s valuations to secure their wealth and set themselves up to weather whatever the next few years of course correction might bring. There are two main ways that we are currently helping Canadian’s lock in the wealth they currently hold in their homes:
Readvanceable mortgages
A readvanceable mortgage combines a mortgage and line of credit, giving you access to rotating credit against the value of your home. The key defining benefit of these unique products is that with each mortgage payment you make the amount you have available to borrow increases. Most major lenders that offer this type of mortgage allow homeowners to borrow up to 80% of the current value of the home. So if the market value of your home today is $500,000 for example, you can borrow up to $400,000. If you start out with a $300,000 mortgage you will have a $100,000 line of credit available and with each payment you make, the availability of that line of credit will grow. This means that no matter what happens to the market value of your home in the coming years you will still have access to the same $400,000.
It’s also important to note that a readvanceable mortgage is also a key tool in the Smith Manoeuvre, which allows homeowners to convert their mortgage payments into valuable tax deductions by investing some or all of the line of credit portion. If this is something that you’ve been interested in, now could be a great time to start!
Equity take out refinance
If you have at least 20% equity in your home and the market value is currently greater than what is left owing then you may be able to refinance for more than you currently owe and walk away with the difference in cash. If you have purchased your home in the past few years, this could be a fantastic option for you to access the wealth you have currently build in your home and reinvest it in a way that ensures you will have available cashflow regardless of any shifts in your home’s market value.
Regardless of what market projections are saying at any given time, your mortgage is a powerful wealth building tool that can (and should) be used to help you create security for your family. You have already done the hard work of purchasing a home and starting to grow your investment simply by making payments. Give our team a call and let us help you supercharge your wealth by taking advantage of the higher market values today.
