Your home will usually take care of your most basic of needs for shelter, but did you know that your property can be a wealth-building asset if you educate yourself on how to leverage your equity properly?

Equity speaks of what percentage of your property you actually own. How much you’ve paid off compared to how much you owe.  When borrowing from your equity your property is always the collateral. Compared to credit cards this route will usually have a much lower interest rate.  The risk lies in loosing your house if you are ever delinquent on your payments. 

Unfortunately, the word “debt” has tied to it a lot of negative views and opinions. However, acquiring debt can be a step forward to increasing your personal wealth faster than just saving up. When you decide to invest you can either use your own money, which could affect your cash flow or use other people’s money. This is where we touch base on what it means to leverage your home equity. 

There are 2 options lenders will present to you when borrowing using your house a collateral.  One is a HELOC (Home Equity Line of Credit) or a Fixed Term Home Equity Loan. The Home Equity Line of Credit is a lump sum payment that is amortized over a set amount of time. HELOC is much more flexible and allows you to withdraw any amount within your credit limit.

Strategies

The Financial Consumer Agency of Canada says that HELOC’s contribute largely to the growth of household debt because of their flexible nature and accessibility. Using these loans to grow your wealth rather than to fuel your lifestyle should be every smart homeowner’s goal.  Let’s go over how you can get started with this strategy.

Stock Market

Stocks have been known to be a high-risk investment but given the right knowledge of economic trends, company history, and the industry sector this could be a consideration for certain situations. 

Renovations

Renovations are a wise investment if you plan to sell your property.  Many renovations can greatly increase the value of your property and yield a much higher return that you might expect.

Business

Putting your business expenses onto a credit card is the wrong decision in many cases.  High interest rates and a low point in the business can be a recipe for disaster.  Borrowing against a property is a smarter and more cost-effective way to start a business and fund its growth.

Education

Going back to school can be a good decision but you need to ask yourself whether this move is a good investment and will benefit you in the future.  Although education cannot be repossessed it is something that does not guarantee a financial increase. 

Investment Property

Some people choose to invest in investment properties using their current home as leverage.  You can purchase a commercial, residential or retail property that can be rented out and turned into a self-liquidating asset. 

There is always risk involved when high yields are on the table, so it is always a good idea to diversify your investments into multiple avenues if possible. 

There is no one size fits all when it comes to investments.  It is dependent on your unique circumstance, your assets, and your ability to handle the mental and physical weights of the stress involved.  There are many things to discuss when it comes to investing.  Far more than can be discussed in a single article.  Give us a call to talk about your options and we can start designing a plan that will fit your lifestyle.