Most people think of their mortgage as just another bill to pay, not really seeing it as an investment. This mindset has got to change because far from a money pit, a properly handled mortgage is like building up a savings fund for a rainy day.
A mortgage is an investment because the more you pay towards your mortgage, the more home equity you’ll have. Home equity can be tapped and turned into cash via a second mortgage or a home equity line of credit – giving you a way to use the equity you’ve built up in your home without resorting to selling your home. Below are the ways on how you can convert your mortgage and your home equity into usable cash.
Apply for a Second Mortgage
Applying for a second mortgage will allow you to access as much as 80% of your home equity. This is released as a lump sum that you can use to pay for huge one-off expenses such as for debt consolidation and paying for renovation, both smart uses for your home equity as both can improve your finances by a large margin if done right.
Applying for a home equity loan or a second mortgage may or may not be an issue for you depending on your credit score and existing equity. Most banks decline people with no stable source of income or those whose credit score don’t meet up to bank standards. Private mortgage lenders are generally more lenient and can draw up more manageable terms especially with the help of private mortgage brokers.
Remember that a second mortgage means another loan that will have to be paid on top of the primary mortgage. It is best to have professional help regarding the terms to make sure that you won’t have issues paying off 2 mortgages at the same time.
Get a HELOC or a Home Equity Line of Credit
A HELOC allows you to access your home equity in the form of a revolving credit. This means that there will be a predetermined ceiling amount from which you can borrow and re-borrow up to a certain time frame.
A HELOC can help you tap up to 65% of your home equity and is a great financial solution for large recurring expenses such as financing university tuition or medical treatments.
Refinance Your Mortgage
A mortgage refinance is a means to give your current mortgage contract an overhaul to make it more manageable for you and possibly get some savings in the process. Just like the 2 ways to convert your mortgage into assets that were mentioned above, a mortgage refinance doesn’t come free. There are fees involved which you have to consider to determine if paying for the fees will still give you a substantial enough savings to justify going through the process.
If you’re not sure which amongst a mortgage refinance, a HELOC, or a second mortgage is the right way for you to convert your mortgage into an asset, a consult with mortgage professionals will be the next best step. Contact us today so we can help you get answers!