Access Home Equity
Your home equity – your home’s value minus the balance of your mortgage – is available for you to withdraw and invest in a number of ways, including home renovations, additional real estate, post secondary education and much more. You can access up to 80% of your home equity by increasing the value of your mortgage through a refinance.
To understand the math behind determining your available equity please consider the following example:
Other Options To Access Home Equity
In addition to a mortgage refinance you may also want to consider a home equity line of credit or second mortgage. There are key differences between each loan which we will now outline. A refinance is essentially a ‘re-mortgage’ and allows you to, therefore, access the same interest rates as a traditional mortgage, while a HELOC’s rates are slightly higher than their variable rate counter part. Further, unlike a refinance, with a HELOC all of the funds are not advanced upfront. You can withdraw as you please and only pay interest on the amount you take out. You are also not subject to a refinance penalty.
As a third option, you could look into a second mortgage, which may allow you to access more than the 80% loan to value ratio offered through a traditional refinance or home equity line of credit product. Second mortgages are almost accompanied with a much higher interest rate, are not offered by all lenders and thus are less popular.
Looking at all three options, you can see there are many factors to consider and the benefits must be weighed against the costs.
It is best to speak to a qualified mortgage professional who can help you evaluate your equity refinance options.