30 Aug FAQ: Equity in Your Home
We often hear about equity against a mortgage and how the homeowner should use their equity to invest in another real estate asset or another type of investment.
What exactly is equity and what is the best way to utilize it to your advantage? Let’s examine some FAQ’s!
Q: How do you accumulate equity on your home?
A: Equity accumulates as your mortgage is paid down. As the owing amount on your mortgage decreases and the value of your home increases the bank will lend the mortgage owner a percentage of the difference. That value is referred to as home equity.
Q: How do you access the equity in your home?
A: To access the equity, your financial advisor will set up a line of credit attached to your mortgage for the eligible amount. You then access the funds as you would a line of credit.
Q: Can you use the funds for any purchase or is it tied to real estate only?
A: You can use the funds to purchase anything you wish, or to pay down debt at a lower interest rate. You will have to make regular payments as you would with any credit card or line of credit.
Q: What is the interest rate on the funds?
A: The interest rate is based on prime so it is almost always a better rate than any other type of loan… and definitely better than credit card interest rates.
Q: Did you know that having an investment property has tax benefits related to how you hold your leverage?
A: Interest on your income property is considered an expense – and it can be written off against income generated by the property. Interest on your primary residence is not an expense! Always make sure that your leverage is properly structured to maximize your tax benefits.
Your property is both a home and an investment. Treat it as such by taking advantage of all the benefits of owning this valuable asset! If you’re interested to learn about the ways you can access the equity in your home to diversify your portfolio, contact us and we are here to help. Contact us today at www.shirriffwells.com