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Posted by on Jun 26, 2014 in Real Estate | 0 comments

Is taking out home equity profitable?

Is taking out home equity profitable?

The real estate market has known quite significant fluctuations over the last years and while there was a time when house value was certainly increasing, recent statistics have shown that most of the homes are now decreasing in value, which makes people wonder whether home equity is the right answer anymore. Many individuals have resorted to home equity loans or credit lines in order to get the finance they needed for various urgencies, such as house additions, remodeling or repairs. As said, taking out equity in your home used to be a go to solution, but now it remains to be seen if the solution is still a profitable one. One thing is for sure though, if you are planning on making such a move, you need a good broker, such as http://nickkaaki.ca, one that can offer you options and can find you the best rates and the most suitable loans for your needs.

 

If you are not sure what home equity really means, it refers to the difference between the market value of your home and the amount of money you still have to pay on your mortgage. If you bought your house for $400 000 and put down $50 000, it means your mortgage was $350 000. If the market value increased and you house is now worth $500 000 and you paid $100 000 on your mortgage, this means you only have $250 000 left to pay, therefore the equity is $500 000 – $250 000, meaning $250 000. You can use this money to borrow against from the bank. Home equity loans are also known as second mortgages and they can provide you the finance you need, usually on a shorter term than the first mortgage. Anyway, if the market value of the house decreased, then the equity may be negative, which means you risk being in debt even if you sell the house at some point. The greatest advantage of taking out equity on your home is that you benefit from very low interest rates, as you put your house as collateral. It sounds like quite a profitable deal, the only problem being whether or not the market value of your house has increased or not, which you can easily find out by talking to a mortgage broker, such as http://nickkaaki.ca or by having the house evaluated.

 

Due to the fact that taking out equity on a house has always been a popular practice and it has been very profitable in the past and because many individuals are aware of the fact that the real estate market is fragile, people take all sorts of steps in making sure the value of their houses increases, such as investing in all sorts of improvements from energy efficient windows to insulated roofs and remodeling. If you house value increases indeed, then taking out equity is truly an affordable deal, as you get the finance you need at very low interest rates, provided you find an experienced and proficient mortgage broker.