What is home equity, and how can I use it?

model of a home

Buying a home is one of the biggest financial investments that most people make in their lives, and is often seen as a preferred alternative to renting because of how you can build up home equity.

Simply put, home equity is the difference of the market value of your home and the amount of your mortgage. Equity is built by making regular mortgage payments, the market appreciation of your home, and by completing renovations or improvements to the property. The built-up equity in your home can help you reach your financial goals in a number of ways, but should you use it, and how?

The answer depends on your circumstances and your goals.  Equity can be accessed in a number of ways such as a personal loan, line of credit or refinanced mortgage.  If you’re in need of a smaller amount, you’re probably better off considering a line of credit or personal loan. However, if you’re planning a larger expense such as a home renovation, consolidating debts, or the purchase of a vacation property, refinancing your mortgage to leverage your home equity is a less-expensive way to finance your borrowing needs.

Here’s why: borrowing against your home is generally seen as a less-risky investment by financial institutions, which is why mortgage rates are typically much lower than the rate you will get on a personal loan. You can borrow up to 80% of the value of your home, including your mortgage, which makes refinancing an excellent alternative to high-cost borrowing.

Refinancing isn’t for everyone, and it’s important to know all your options. A Cambrian Financial Services Officer can help determine the best solution for you to reach your goals, no matter how large or small they may be.

Contact your branch today to make an appointment to speak with a Cambrian Financial Services Officer.