Have a mortgaged property? Worried about its future? Here are a couple of things you need to understand.
First, a mortgage is often viewed as a challenge, but you can turn it into an opportunity. Second, mortgage allows you to make money, but not unless you follow certain strategies. Third, you must be aware of recent mortgage rule changes. For example, Bank of Canada introduced a new rate in fall 2016 that changed eligibility requirements for high ratio mortgage borrowers.
Turning challenges into opportunities is undoubtedly motivating, but it requires patience, dedication, and hard work. And most importantly, the implementation of the right strategies, which include
Exploring new options
People with a rigid mindset believes borrowing is inherently bad and they should channel all their funds and energy to pay off the mortgage debt. They might repay the debt but find themselves grappling with economic difficulties afterward. Making money with your mortgage is challenging and you need to stop considering debt as evil to achieve that. Only then can you realize mortgage presents your options.
Besides, early repayment of the mortgage debt is often a bad idea for it invites exit fee which can be expensive. Sometimes, exit fee applies long after you pay off the mortgage debt. And then there are opportunity costs. In short, early repayment brings peace of mind but at the expense of economic losses.
Making money with mortgage
So how to make money from your mortgage then? I suggest that you explore investment schemes that promise a decent rate of return. Two things you need to check. First, it’s not a get-rich-quick type scheme. Second, the return is higher than the normal interest rate, but not exorbitantly high. And most importantly, make sure the return promised by the scheme is more than the mortgage interest rate. Making money with your mortgage is possible only when you take strategic steps like this.
A futuristic vision
Your vision shouldn’t be stuck at the present. It should be expanded to see the near future. In the future, you’ll be paying more for your grocery bill, phone and electric bill, fuel and all other stuff because of inflation. But one thing will remain the same – your mortgage interest rate (provided you have taken the mortgage loan at a fixed interest rate. Paying less in an inflated market means saving money. Hence when inflation is added to the equation, you demonstratively see how to make money from your mortgage.
The equity value of a home
Paying off the mortgage over the time has many benefits. One of these benefits is taking full advantage of the equity. If you make part repayment and the value of your home surges in the future, its equity will increase. You get a home’s equity when you subtract the loan amount from how much the property is worth right now.
Let’s say you purchased a house at a price of $500000 five years ago and borrowed 80% of the money. If you repay 50% of the amount that you have taken a loan and your home is now $600000 worth, the home’s equity is $550000. Inflating the home’s equity is one of the ways of making money with your mortgage.
Refinancing to cash out
You may want to cash out your home’s equity if an investment is in your mind. There are two ways you can do this:
First is by selling out the home. You get all the cash and the remaining money after repaying the mortgage debt. Either invest that money or spend it. Alternatively, you can take home equity loan and use that money to pay medical bills or college education while at the same time getting to stay in your home.
Qualifying for home equity loan requires paying off a fragment of the mortgage loan. Making money with your mortgage is really fun as you may not be able to access the entire equity of your home. The loan amount would be decided accordingly. However, home equity loans can be risky. So tread carefully.
Line of credit
Feel free to experiment, or else you’ll never know how to make money from your mortgage. That being said, never ever put your line of credit at risk. Home refinancing affects it. The home equity line of credit qualifies you for interest-only repayments. The benefit is that the interest you will be paying will be tax deductible.
The line of credit is crucial when making money with your mortgage. If you don’t quite understand it, I advise hiring a financial consultant to ask him the things you have doubts about.
A lot of people surf on the Internet to find resources on how to make money with your mortgage but end up with little to no useful resources. This article here can give you some insights into it that you can use.