Posts Tagged ‘Home Ownership’

Home Equity Loans Allow Canadians To Leverage Housing Gains

December 18th, 2009

Home equity loans can allow Canadian homeowners to leverage the gains they made in what was until recently a red-hot housing market into investments in other sectors. Home ownership, which was once the key fundamental to Canadians’ wealth accumulation strategies, while still important, will likely take a back seat as a strategy in the near term as investment savvy home owners shift their accumulated wealth into other markets. Leveraging built up home equity is a highly advantageous method of making this switch in investment tactics. The most recent economic forecasts indicate that Canada’s overall housing market has settled into what will be a period of slow growth. Home owners who saw the equity in their homes grow by leaps and bounds as Canada enjoyed its longest sustained housing boom since the Second World War are now sitting on substantial capital that is locked up in their home. But the return on this capital will only grow moderately over the next several years and it is not clear that gains in housing prices will necessarily outstrip inflation. The latest view from economists at the TD Bank Financial Group is that sales of new and existing homes are likely to continue to decline in the near term and housing prices will only increase modestly. TD’s forecast is that “sales are likely to continue to decline in the coming quarters and price growth will slip to 2% on a national average basis in 2008 and rise only to 3. 5% in 2009. ” They note that this national average will vary by regional markets, with some local markets that saw the biggest run ups in housing prices – such as those in Alberta and British Columbia – experiencing a drop in housing prices as regional markets adjust. But, they predict, “Most markets will see low to mid single-digit growth. “ The Financial Post reports that most leading economist are expecting the Bank of Canada “to keep interest rates at 3% in 2008 before hiking them in 2009 as inflation becomes more of a concern and the U. S. economy picks up. ” Of course, as Canada’s central banker hikes its lending rate, banks, trust companies and other financial institutions will raise their prime rates in due course. With current low interest rates, homeowners looking for more continued and substantial growth in their existing assets can take out a home equity loan for investment purposes and purchase a risk balanced investment portfolio that is highly likely to carry a much better return than the moderate housing price increases that are forecast for the rest of 2008 and into 2009. The bonus is that the interest paid out on a home equity loan taken out for investment purposes is tax deductible. Effectively, the tax savings a typical homeowner/investor is likely to get will in most instances offset a large portion of the borrowing costs. If gains on the investment outstrip, as they should, the moderate gains forecast for housing purposes, homeowners who leverages their home equity in this manner will see real growth in their overall assets. An abundance of caution should of course be used when leveraging your home equity in this manner. Ensuring that the investment portfolio you choose is well balanced is a key. Working with an experienced and knowledgeable financial planner is highly recommended, as is working with a mortgage broker to access the best available rates and terms for a home equity loan while interest rates remain at their current low level.

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Home Equity Loans-How To Zero Out Credit Card Debt

December 11th, 2009

Millions of Americans are up to their ears in debt. They struggle every month just to meet the minimum payment which just prolongs the debt. Credit cards have high finance fees. Hence, it is difficult to pay down balances. In most cases, the minimum payment barely covers the finance charges. This makes it difficult to reduce the credit card balance. One approach for eliminating or reducing debts involves acquiring a debt consolidation loan. Although debt consolidation loans will not miraculously eliminate your debts, these loans make is possible to reduce your debts faster. In 2005 the value of home equity across the US was $11. 3 trillion. The percentage of home ownership in 2005 was 69% down slightly from the record 69. 2 % in 2004. Almost 124 million Americans own their own home. There is plenty of money available to lend. If you obtain a debt consolidation loan, all your credit balances are lumped into one loan. Furthermore, debt consolidation loans have reasonable interest rates. This enables you to become debt free within a few years. There are various ways to obtain a debt consolidation loan. Individuals with good credit may qualify for a personal debt consolidation loan. If you own a home, it may be possible to get approved for a home equity loan. Home equity loans are ideal because the rates are low and the terms fixed. Usually, homeowners are able to repay the money in five to seven years – sometimes less. Just beware that home equity does not automatically go up every month like some would have you believe. Several factors far beyond your control determine the value of your home. Just within the last six months or so the value of homes in some parts of the country dropped by 10% in a month. Before you get a home equity loan you should know these facts. • They are secured by a second deed of trust on your house. • If your financial situation changes your home could be at risk of foreclosure. • Having to make two payments on your home can be a lot of financial strain. • A lot of unscrupulous lenders could care less. • Keep your eyes open to what the local housing market is doing. Just recently many areas experienced a 10% decline in values in one month causing many homeowners to owe more than their home was worth. It is essential to use the funds wisely and borrow only what you can afford to payback. Most Americans who use their home equity to pay off their credit card debt refuse to change their habits and lifestyles, and actually see their zero-balance cards as an invitation to go shopping – perpetuating the cycle. Before you put your home at risk with a second mortgage understand the risks. Explore all the possibilities. Just because a home equity loan for debt consolidation seems so easy to do and easy to get, doesn’t make it the right choice for you. Don’t press the EASY button.

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