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The coronavirus pandemic has transformed life for Torontonians in many ways, but one of the most extraordinary changes it has brought about is an almost unprecedented surge in the real estate market.
Home prices have shot up by a shocking 22 percent over the past year, leaving the average price for a property around $1 million. In a city that has seen an almost unbroken rise in the cost of houses and condominiums since 2010, the white-hot housing market has left many homeowners who bought properties at the beginning of the boom wondering what to make of their good fortune.
This article will outline some of the ways Toronto homeowners can reap the rewards of their increased home value without actually having to sell the properties they live in.
What Rising House Prices Mean for Home Equity
Home equity is the value that a homeowner holds in their property — essentially, it is the current market value of the home minus the outstanding mortgage or mortgages. Home equity increases in two ways:
- Regular mortgage payments cause the percentage of the property owned by the homeowner to increase over time.
- The price of the home increases, driving up the margin between what is owed on the mortgage and the resale value.
This means that even Toronto homeowners who still have a mortgage have seen their equity grow significantly over the past year. This makes 2021 the perfect time to get a home equity loan in Toronto from a residential mortgage broker.
How to Use Home Equity Loans
Home equity loans are financial tools that allow you to borrow against your home equity. Because they are a secured form of a debt, they are one of the cheapest ways to borrow large amounts of money for a variety of different purposes.
For example, home equity loans are commonly used to consolidate high-interest debts into a single low payment, or to finance home improvement projects or major renovations. If you don’t have the cash to replace your roof, for example, a home equity loan is a responsible way to cover the expense without worrying about taking on high interest.
Because home equity is still a form of debt, it is generally a good idea to treat it not as a source of free money but as an investment — but if you’ve been thinking of starting a small business or undertaking renovations that will make your home even more valuable, home equity is a great source of funding.
Many Toronto real estate experts believe the current rapid increases in home prices will taper off as interest rates rise to cool the market. This means that homeowners looking to refinance or secure a home equity loan should move quickly to take advantage of the situation before rates start ticking up.
If you want to unlock some of the new equity that has built up in your property, get in touch with a mortgage broker specializing in residential second mortgages and home equity loans today.