Top Uses for Home Equity Loans

Getting a home equity loan in Toronto one of the increasingly popular ways for Canadians to take advantage of current low-interest rates and increasing house prices. Below are the top uses that Canadians are utilising their home equity loans for.

Funding Home Renovation

A home equity loan is a smart way to raise funds for home improvement and renovation. Renovating a home results in increased home value which can then further decrease a loan’s interest rate. More so a renovated home is not only more attractive to look at but is also often more functional.

Bathroom Upgrades and Addition

Building another bathroom can add a huge value to a home, but if you cannot do this, adding upgrades such as new cabinetry or overhead storage can be great as well. Sometimes refinishing a bathroom is all it takes to add great value to a house especially if it is the master bathroom or the guest bathroom downstairs.

Kitchen Makeover

A kitchen remodel doesn’t have to mean spending so much money on appliances and finishes that look like they should be in magazines or fancy hotels. A little paint goes a long way, as well as resurfacing old counters or replacing outdated hardware. Just changing the lights and other fixtures can be friendly on the budget and still have a huge impact not just on aesthetics but also on function.

Room Reinvention

Building a new room can be very expensive but you can achieve almost the same results and add value to your home if you convert an unused room into a more functional one or decide to divide a huge room into two (or combine small ones too by knocking down partition!). If you got some unfinished attic or basement space, you can convert those spaces into an office, an additional bedroom, or a family room that you can enjoy.

Go More Energy Efficient Windows

Energy bills are usually expensive. This is why savvy homebuyers look for homes with energy efficiency built-in and are willing to pay more for such home, bringing the value of homes that are energy efficient significantly higher. Some people may balk at the idea of spending $7,500 to $10,000 to replace windows with more energy-efficient ones but the expenses can be easily recouped because not only does it add to the home’s perceived value, it also saves homeowners a few hundred dollars per year for an average home.

Update Insulation

Good insulation can save homeowners a few thousand dollars a year in power bills. More so, bad insulation will be noted by home inspectors in their reports and will bring down the value of the home. By making small changes to improve home insulation such as adding extra insulation in the attic for a couple of hundred dollars, you can save hundreds to thousands of dollars a year plus make your home more attractive to potential buyers when it is time to resell your home.

Paying Taxes

Back taxes can be as high as a few tens of thousands of dollars, cash that not everyone has in their savings account. Home equity can be tapped as a short-term loan that can be used to pay the CRA for back taxes.

Home Construction Loan

A home equity loan can be used to fund a home construction. This has been done by a lot of Canadians in recent years when upgrading to a new home.

Paying for Big Purchases for Self-Employed Individuals

Self-employed individuals often face stricter lending restrictions, making it difficult for them to buy a home or make a big purchase using a loan. Tapping their existing home’s equity is a good workaround to the existing system.

Investing in Advanced Education

Going to a university can be very expensive, more so for someone who doesn’t have a lot of savings or who have to stop working to complete a degree. By using equity to finance education, a person can afford to stop working for a year or two to place himself or herself in a better position to earn money to pay back the home equity loan.

Starting a Business

Starting a business needs capital and capital means lots of money. By accessing home equity, a homeowner can gain easier access to funds as compared to getting other types of loans. A home equity loan can also be used to pay for a business loan.

Spousal Buyout After a Divorce

Divorce is sometimes followed by having to split the family home so each party will get to have a share. In situations where one spouse can’t just move out and get another place, getting a home equity loan to ‘send off’ a spouse is not uncommon.

Debt Consolidation

Home equity loans in Canada are most often used for debt consolidation. This is because tapping home equity is for a loan has significantly lower interest rates as compared to credit card debts and personal loans. By using home equity for debt consolidation, homeowners can save a lot of money on interest as well as having to worry about paying several separate bills per month.

There are many uses for home equity loans in Canada. Thanks to their flexibility, they can be utilised as a solution to various financial situations. Contact us if you need help getting a home equity loan in Canada or want to assess whether applying for a home equity loan will be best in your situation.