Below I have detailed the most frequently asked questions on equity financing. Take a read and if you have any further questions please do not hesitate to private message me.
What is home equity? Home equity is the difference between a home’s value and the outstanding mortgage balance on the property. Your home equity increases as the mortgage is paid down, renovations are made or as the property value appreciate. E.g. If your mortgage balance is $400,000 and your home has a market value of $1,000,000 then you have equity of $600,000. Depending on which bank you approach for financing the amount that you can borrow of the $600,000 will vary as most banks will not allow you to take out 100% of your equity.
Why take advantage of equity financing? There are a number of different ways to utilize the equity in your home. Some of them are:- home renovations, purchase another property, help with a family member’s education, purchase investment options, major medical expenses or to save on interest costs. Other ways are kitchen makeover, turn bathroom into a spa, backyard retreat, upgrading appliances and home repairs.
How can I save on interest costs using equity financing? Mortgage financing tends to be the cheapest form of interest costs. When you compare the other types of financing options you can see what we mean. See below a comparison of interest rates based on the financing product:-
- Mortgage Rates – 4.5%
- Car Loans – 6%
- Line of Credit – 9.5%
- Credit Cards – 24%
Therefore some customers will take the equity out of their homes to refinance car loans, line of credit or credit cards. It will ensure that you pay a lower interest cost and also have a more comfortable monthly payment. Refinancing other loans can literally change your financial position is done correctly.
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