What exactly is home equity? Simply put, it is the value of the ownership you stake that you have built upon a home you own. In other words, it is the difference between your home’s value and how much debt that’s left on your mortgage. And, to increase equity, you can pay off your loan, or you can hope that your home’s value in the market increases.

So, why is knowing that so important? Well, there are a ton of uses for your home equity, so knowing how much you have to work with will enable you to capitalize on it!

That said, let’s talk about all the uses you can have with your home equity:

1. Home Equity Loans

One of the most popular uses for home equity is to make a loan out of it. After all, this is a great way to borrow money that can serve to get something you otherwise wouldn’t be able to when you might not have the cash.

By making a home equity loan, you can use the borrowed funds to finance a business or personal project. You can also put it toward paying off outstanding debt or even buying a new car or house. The possibilities are endless.

To qualify for a home equity loan, you must:

Own your home.

Be a collateral-free borrower.

Have a high enough credit score.

Have sufficient equity in your home.

Have sufficient income.

Have a good financial record.

2. Home Equity Line of Credit (HELOC)

A home equity line of credit, or HELOC, is like a credit card that you can use to borrow money and pay off the balance whenever you want. You can also use it as a buffer to pay off a home equity loan if you use the line of credit as a source to pay off your loan.

The benefits of HELOC are that it affords you easy access to money, and you can use the money anytime, provided you have a good credit score. When it comes to a HELOC, the main drawback is that it comes with high-interest rates, which can be a big disadvantage.

3. Debt Consolidation

An excellent use of home equity is to help you consolidate debt and get rid of your high-interest credit cards. This will help you reduce the amount of debt you have and also save you quite a bit of money in the long run.

One of the biggest advantages of debt consolidation is that you can consolidate your debt all into one place, which will help you save money, lower your interest rate, and see all your balances combined into one payment.

Conclusion

It’s great to know that so many uses of home equity are there for you. However, it’s also important to be wary of home equity scams, like negative equity, virtual equity, and cash-out refinance scams.

As long as you do your homework, carefully review the contracts you sign, and do as much research as possible, you’ll find that home equity can be a powerful tool to help you achieve your financial goals.

Mills Financial Group is part of the TMG The Mortgage Group, offering agents, mortgage brokers, and more to meet residential and commercial mortgage needs. If you are looking for 48-hour equity loans in Ontario, get in touch with us today!