Building Your Real Estate Empire: Putting Your Equity to Work

You may have heard that a buyer’s market is the PERFECT market to purchase real estate for investment purposes. But have you ever wondered, and thought you should know, but have been too shy to ask…..who has a half a million dollars sitting around just waiting to be invested?! If you are like millions of Canadians, you don’t. So how are so many people able to invest in property and take advantage of this market and the low cost of lending that we are currently enjoying? Tapping into a Home Equity Line of Credit is the answer to building your real estate empire, and ultimately building your personal wealth.

KEY POINTS TO CONSIDER:

• A HELOC uses the equity in a home to provide investors with extra cash for a down payment and the purchase of an investment property.

• Ask us to refer you to one of our preferred Mortgage Brokers to guide you on your HELOC journey.

• Accumulated a bit of higher interest credit card debt along the way? A home equity line of credit can also be utilized to consolidate debt.

Using a Home Equity Line of Credit  (often referred to as a HELOC), to purchase an investment property will allow investors to tap into assets, such as the homes that they are living in, that have managed to build up equity over a period of time. Rather than leave this equity untouched, homeowners can use a HELOC to do things such as upgrade their home, purchase a second or third investment property, or even consolidating debt. Understanding how to use a Home Equity Line of credit is crucial for anyone looking to build wealth through real estate investing.

WHAT IS A HOME EQUITY LINE OF CREDIT (HELOC)?

A home equity line of credit is a homeowner line of credit that is advanced based on the value of the property that is being used as security and typically is separate from your traditional mortgage. It is different than a regular mortgage in that the borrower is required to make an interest-only payment on the amount actually utilized rather than on the entire amount of the Line of Credit extended.

HOW TO PURCHASE AN INVESTMENT PROPERTY WITH A HELOC

In order to use a HELOC to purchase (investment) property, investors must first have an asset with enough equity to tap into - ie. you have a $300,000 mortgage on an $800,000 dollar home. When this kind of scenario exists, a HELOC becomes an excellent source of financing. This means you can tap into a percentage of your $500,000 equity to borrow for either a down payment on another home, debt consolidation etc.

- Investors can borrow money against the equity in one rental property to fund the purchase of another.
- Investors can use a HELOC to fund home improvements for their rental properties, just as a homeowner would for their primary residence.
- Investors can also use HELOCs to pay off other high-interest debt if necessary.
- Consider that rental property mortgages generally carry a higher interest rate, smart investors can get a HELOC on their primary residences to pay off the mortgages on their investment properties.

When speaking to a mortgage broker, a lender will look at your debt-to-income ratio, your credit score, other open accounts, and a homeowner’s overall financial health.

If utilizing the equity in your home to purchase additional properties and build real estate wealth is a new concept to you, and one that you are potentially interested in finding out more about today, please do not hesitate to contact Ranj, Dave or Jenn. We work with excellent mortgage brokers that will help guide you in discovering the amount of equity that you can put to work.