Top Facts About RRSP Home Buyer’s Plan

Using Home Equities to Buy Rental Properties

 

Ever find yourself thinking about home equity and what it can do for you? It isn’t just a thing you only see in mortgage commercials; it’s an aspect of our lives. Home equity is essentially the money that your home makes for you. Suppose you own a property that was once worth $200,000 but is now valued at $600,000. The $400,000 increase in the market value of your property is your home equity, and it has been growing steadily over the time you have been a homeowner.

 

Interest rates continue to rise, which means that the initial price you paid for your property will eventually become a small fraction of its current market value. If the value of your property rises by 80%, then perhaps it is time for you to leverage your home equity for a loan on second investment property so you can grow your money even more. Keep in mind that you must go into this with the mindset to cash in on it down the line.

 

Vacation or Rental Properties?

Your first real estate purchase must have been an overwhelming one, and understandably so because you paid such a considerable amount for it.

But that was the right decision on the journey of growing your wealth. It opens quite a few doors for you when it comes to your second investment. You can turn it into anything you want; a family getaway, Airbnb, rental, or a cottage. You don’t necessarily have to invest in a house; it can even be a condo to begin with.

Home Equity Line Credit vs. Reverse Mortgages

When you apply for a home equity line credit (HELOC), your lender may be able to give you anywhere up to 80% of your property’s current appraisal value. With this loan, you can have access to the money without paying interest on it until you begin using the home equity funds. The most significant advantage you’ll receive with this kind of loan is that you can borrow more money depending on how much you’re able to pay back as a borrower.

 

You need to have a good credit score to secure a HELOC loan so you can prove to the lender that you have a stable source of income.

 

Now, let’s get into reverse mortgages. If you wish to use your existing property as leverage for another loan, a reverse mortgage will allow you to do that. You won’t have to start paying monthly mortgage payments until your property is sold. However, the interest you aren’t paying now will be accumulated and will have to be paid off later.

 

The only things that factor into your loan being approved for a reverse mortgage are your home, age, and location. You don’t necessarily need a very high credit score for a reverse mortgage loan.

 

If you wish to find out more about mortgages and which one is ideal for you, contact Kyle Adams of Adam’s Mortgage Team now at kyle.adams@ontariolendingsolutions.com .