How to Be Smart With Your Home Equity

In Mortgage, Real Estate
Senior couple next to the window

We’ve seen quite a large increase in property values in most markets throughout Ontario. This has increased the net worth of many homeowners who are looking for smart ways to take advantage of this hot market.

The equity of your home is the difference between the amount left on your mortgage and the value of your house. Since your house has likely increased noticeably in value recently then you’ve probably seen a good amount of new equity in your house.

Selling your house is one way to cash in on the equity, but this involves all the fees and costs of selling and moving; it is common for empty nesters to move from a house worth perhaps $1.2 million and move a couple hours away and buy a house for $300,000. This give them a considerable amount of cash on hand to live off and invest for many years.

If you’re not interested in moving, there are other things you can do with the equity, such as getting a Home Equity Line of Credit or even refinancing your existing mortgage. Here are some other smart ways to make the most of your equity.

1. Renovating your home

Renovating is one of the most popular reasons a home owner cashes in some equity. This is essentially a way to get your house to invest in itself. Renovating your home through equity is also a smart move because it makes the home more valuable, thus creating even more equity. A line of credit is a smart move for renovations because allows you to only take out the money you need when you need it, rather than one lump sum, which makes it easier to only borrow and pay interest on what you need.

2. Paying Debt

Using the equity on your home to pay off other debts is a smarter move than it sounds. Refinancing your mortgage allows you pay off an unsecured loan and potentially save you a lot of money in the long run. These unsecured loans, which aren’t tied to a particular asset, tend to have very high interest rates. The money you take out in equity can be repaid at a much fairer interest rate. The only problem is that you might find yourself taking on more unsecured debt. Paying your debts with equity should only be considered if you’ve brought your spending under control and know you won’t just find yourself in more debt.

3. Education

Using the equity of your home can be a good idea if you need to pay to get a professional certificate or degree and advance your career. It’s an especially good idea if you open yourself up to more potential jobs and a higher earning potential after getting your degree. Even if you’re not looking to go back to school yourself, paying for a child’s education with equity is one of the cheapest ways to cover college or university if you haven’t been saving in an RESP since they were young.

4. Buy an Investment Property

Plenty of regular people get their start in property investing by investing in another property using the equity of their existing home. With a solid plan to buy a nice property nearby, rent to nice, but carefully screened tenants, and ensure your rents cover you expenses you can significantly build your wealth with minimal effort. It’s best to avoid using equity for higher risk investments such as time shares or land investments unless you really know what you’re doing.

Don’t make it too complicated – buying one other income property and managing it well will add hundreds of thousands of dollars to your retirement and quickly pay back the equity on your own home.

5. Buy an Recreation Property

Shifting some of the equity from your home into a cottage or recreation property can be a great investment. You’ll need to ensure that you can cover the new costs of owning a second property, but after years of great family vacations and making mortgage payments you’ll have built up good equity in this property as well.

No matter how you choose to invest your equity, it’s important to remember that it isn’t some kind of free money. This is a loan that will need to be paid back. It should only be used for improvements and appreciating assets like additional property or education. Taking equity on your home and using it for a vacation, a boat or to enjoy more day-to-day expenses is just asking for trouble.


If you’d like to discuss more about smart ways to use your equity, please reach out by phone or email – 905.903.4799 and

Steve White | Mortgage Advisor
Author: Steve White | Mortgage Advisor

Steve White is a mortgage advisor agent with Mortgage Alliance with nearly 10 years experience as a real estate investor and agent. He specializes in working with new homeowners and investors. He helps homeowners use their mortgage to make the world a better place, from sponsoring and funding minor league sports, financing medical research and working towards solving homelessness and international poverty.

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