The key to relieving your financial stress could be inside your four walls.
They say that money can’t buy happiness, and of course, at its core, that adage is true. But money can buy some freedom, some rest and some stress relief in trying financial times.
But suddenly increasing your income isn’t exactly as easy as snapping your fingers (at least for most of us). Instead, we are left with the tools we do build the life we want and to secure out financial futures. This is where valuable home equity comes in.
*Make sure to read to the end of this post to learn how helping your friends learn about their valuable equity can help you win a Kananaskis spa weekend.
Not just a safety deposit box
Remember when we used to stash our most prized possessions and babysitting cash in shoeboxes under our beds? You could consider your home equity is kind of like the grown-up version of that secret box - a wealth reserve you can tap into when needed.
But don’t think of it as just a piggy bank to smash open - that’s a pleasure that should be left in our childhood memories.
With the right strategy, you can leverage your equity to invest in your future self, whether that’s handling surprise expenses with grace, renovating the perfect forever home, or building a financial nest egg that may not have been possible with your current income alone, given the mounting expenses that all Canadians face.
Equity unlocks possibilities. And in times of economic uncertainty, like we have been staring down for what seems like an eternity, possibilities = power. So, how can you tap into this potential source of financial freedom hidden within the walls of your home? Here are the three common options to consider.
Refinance and refresh
Refinancing is the process of effectively replacing your existing mortgage with a new one to improve the terms or access your equity in a liquid form (or, ideally, both).
Some of the most common reasons that we help clients refinance in today’s economic climate include:
Consolidating higher interest debts into a single monthly payment
Lengthening amortization periods to lower payments
Cashing out equity for financial goals like investments or value-add home renovations
Because you will have to qualify for a brand new mortgage, often with a brand new lender, refinancing tends to make the most sense if you have ample equity, strong credit, and plan on staying put for years to come.
You’ll also have to consider potential prepayment penalties if you are breaking your term early, closing costs and even a higher interest rate, depending on your scenario, but many homeowners find that even with all of that accounted for, a refinance is still a lucrative way to access their equity.
For example, Maggie owes $200k on her original $300k mortgage. But with her home now valued at $600k, she has $400k in equity. By refinancing to $350k, Maggie keeps her rate low while freeing up $150k cash. She uses this influx of cash (or loan from her under-bed shoebox) to build a dream kitchen that will keep the family gathered around the table for years to come, and increase the value of her property by far more than her initial investment.
Tapping a HELOC to access cash as you need it
A Home Equity Line of Credit (or HELOC) is simply an open credit line tied to your home’s value. Once approved, you can access funds as needed up to your approved limit.
HELOCs shine when you need flexibility for situations such as:
Handling unplanned expenses
Ongoing home renovations
Major purchases like a wedding or car
Short-term investment opportunities
With a HELOC, you only pay interest on what you use, when you use it. Because it is tied to your home, it’s imperative to practice the discipline to save it for strategic borrowing versus everyday expenses.
For example, if your roof starts to leak, you might consider using your $50k HELOC to finance repairs rather than racking up high-interest credit card debt. Because it is at a lower rate and, in most cases, only requires interest-only payments, funding repairs with your HELOC can go a long way to protecting your budget while also protecting your investment.
A standalone second mortgage
A second mortgage is exactly what it sounds like - taking out a completely separate mortgage loan against your home’s equity with a new rate, new terms, and a new, additional payment. Unlike HELOCs, second mortgages provide a lump sum rather than a revolving credit line.
Second mortgages allow you to:
Access significant funds beyond your primary limit
Tap equity without refinancing your first mortgage
Receive funds upfront for major investments
While rates are higher than first mortgages, they can still beat high-interest debt for strategic goals.
For instance, say a homeowner needs $200k to launch a new e-commerce business that they’ve been dreaming of since the pandemic derailed their career. With ample home equity but good rates on his current mortgage, a second mortgage at 7% gives him an affordable way to fund his dream without having to tap into savings or find an investor.
Use Wisdom, Not a Credit Card
The moral of the story is that tapping your home equity can provide financial breathing room exactly when you need it most, as long as you can resist treating it like an ATM for overspending. Before selecting any borrowing option, it’s important to map out a purposeful plan for how you’ll use the funds to support your long-term security.
Your home equity is more than just a safety deposit box - it can be a security blanket to navigate tough times or a launch pad to your future goals. Our team of Happiness Creators is here to help you explore the optimal way to leverage this wealth you’ve built, as part of a smarter financial strategy. With the right approach, your equity can start working for you.
Help us spread the word and win
We are asking you, our cherished past client community, to help spread the word that equity is a superpower by referring the people you love to have a conversation with us - and we’re giving away not one, but two individual Nordic Spa Packages at The Kananaskis Mountain Lodge which includes a 1-night stay.
To enter, all you have to do is email or call us!
Introduce us to someone you know who can use coaching around their equity this fall via email to your Flare Happiness Creator with the subject line "Talk to Flare" OR have them call us at 587-713-4022 and tell them you referred us. I will then send you an email or text to confirm you've been entered into the draw.
Not sure how to break the ice? It's easy! You can send them a link to this very blog post to introduce them to just some of the strategic ways equity can be leveraged to grow.
We’ll keep the contest open through December 31 2023, and then draw randomly from all those who introduced us by January 15, 2024*
Our goal here is simple - we can share all the social media content in the world, but by far the best way to get the word out and to educate as many people as we can is by sharing the love through our community - through you!
Since opening our doors, the best relationships we’ve built have been through your referrals, and this is one way we’d love to return the love and give two of you a luxurious weekend away - because we
*to be entered, Flare must receive a completed application from the referred party; participants will be notified by email or text when they are entered;
contest open to all current and past Flare clients or Flare VIPs (mailing list members etc);
prizes valued at $868++ each;
contest ends Dec 31, 2023 and will randomly draw 2 winners on or before Jan 15, 2024.
