What is equity in real estate?

Whatever your next project following the purchase of your property, know that your mortgage hides a beautiful borrowing potential, equity.

Also called net worth, this amount is obtained by subtracting the value of your home by the balance of your mortgage loan. For example, the net worth, or equity, of a condo of $550,000 of which there would remain $100,000 to pay in mortgage, would be $450,000. Banks consider that about 80% of this amount is viable to the financing of other projects, at low rates.

Here are some examples:

Refinancing your home

By proceeding with a mortgage refinance, you can base your application on the net worth of your home and thus benefit from a lower interest rate. This maneuver allows you, among other things, to finance renovations, a return to studies or consolidate your debts.

Obtaining a home equity line of credit

Following the same principle as a traditional line of credit, a home equity line of credit provides repayable borrowing capacity guaranteed by the house. Depending on your payments, it is repayable and reusable. Different types of home equity lines of credit exist depending on the nature of the products and projects you wish to finance.

Taking out a second mortgage

By using the equity of a home to finance a second one, you first avoid the headache of the down payment, since the bank considers the equity as viable as a deposit. Note that you are not obligated to devote all of your equity to the down payment, in fact, the balance can be used for renovations, for example. Many real estate investors use this strategy to expand their portfolio of buildings. It's an effective and simple way to make your initial investments profitable. It is also possible to withdraw this value (which is available by a deposit into a bank account) to finance the project of a child who wishes to buy his first home, for example.