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One of the best reasons to apply for a home equity loan is to improve your home and raise its value. If this is your goal than you want to make sure every dollar is invested in the right improvements and not into areas that won’t yield a return.

This means that even if you want to finally install surround sound in your home theatre, it might make more sense to grout bathroom tile.

There are several areas of home improvement that can potentially turn your home equity loan into a healthy investment.

A New Kitchen Can Revitalize your Home

There is no room or aspect of a home that figures more greatly into its value and sale than the kitchen. It’s usually the showstopper and the centerpiece that can inspire bidding wars. When looking to increase the value of your home, the conversation should start (and possibly end) with a kitchen revamp.

Finish that Basement

An unfinished basement can look like a crime scene and there’s nothing worse than when you’re giving a tour of your home and your guest asks about your unfinished basement.  The price of a basement was built into the price you paid so wouldn’t you rather it be more than boxes, hockey equipment and a rusty furnace?

Using money from a home equity loan to turn a dank basement into a functional living space will pay off in spades.

Don’t Overlook Small Improvements

From sealing a driveway to a new backsplash even more modern appliances, smaller changes cost money but they can result in a more valuable home. Now, the growth might not be enormous but the little things can add up and make a difference in the price of your home.

There are dozens if not hundreds of small improvements you can make in your home. The best strategy is to create a room by room checklist and knock them off over a short window of time.

For most, a home is their most prized asset. By investing further in it you are securing your nest egg or retirement plan. This is never a bad idea and a home equity loan is a proven way to achieve this.

Most people don’t think of second mortgages as something that could be useful in a lot of different situations. It’s a way to get cash quick, to pull equity from your strongest asset and to solve short-term financial problems.

With any loan or situation where your home will act as collateral, it’s best to know the right time to consider this option and why it can be promising under the right circumstances.

What is a Second Mortgage?

This is a good place to start. A second mortgage is a mortgage taken out on a property that is already mortgaged. It uses your home as collateral and secures a loan like when you first purchased your home. The processes for both are similar.

What can a Second Mortgage be used for?

Once approved, it’s your money and can be used in any way you see fit. This doesn’t mean that all uses of a second mortgage are created equal, but it’s a lump sum for you to spend.

When Should Someone Consider a Second Mortgage?

There’s a lot of good reasons to consider applying for a second mortgage.  The first thing to consider is whether there is enough equity built into your home. If you’ve been paying off your mortgage for several years, it’s a good bet that there is.

Second mortgages are effective if you need a large sum of money and the popular reasons to apply are home improvements, debt consolidation, education or medical expenses. By no means, are these the only reasons though.

Are there Different Types of Second Mortgages?

Second mortgages can come in the form of a line of credit or as a more traditional loan. It comes down to what the applicant is more comfortable with as there is no right type.

Second mortgages shouldn’t be viewed as scary or that different from other methods of borrowing. Although there’s interest, it’s a way to access funds when needed and to leverage the investment of your home.

As with anything of this nature, it is always best to speak with a trained and knowledgeable professional.

What’s better than escaping the harsh Canadian winters to your own private villa in Mexico or a beach house in Miami? Or maybe it’s owning a cottage that your family can enjoy on weekends?

Wherever your dream vacation home is located, owning one takes money and a financial plan to achieve. The good news is that you might have options that don’t include winning the lottery or discovering you had a rich uncle.

Can you Fund your Vacation Home with a Loan?

Loans aren’t meant to be used frivolously and while a vacation home can feel like a luxury, it can also be an investment. Properties as assets are historically very secure, so using different loan types to invest in a vacation home could work in your favour.

If you plan on treating a vacation like a second home that will aid in your retirement than borrowing might be an option if you can afford the second mortgage.

Invest in the Proper Research

Scour the web and speak to realtors and travel agents to find an under-the-radar spot to buy a vacation home. You’ll pay less and potentially find an intriguing opportunity to turn a profit.

This might mean Arizona instead of Mexico or a cottage outside of Muskoka, but a bit of sacrifice could result in a vacation home and a sound investment.

Finding the Right Partner

Another option is to co-own a vacation home with another person or family. It could be in a timeshare situation, where you would own under specific circumstances with strangers. Alternatively, you could find the right person in your network to invest in the venture. 

Should I Apply for a Second Mortgage?

A second mortgage is a mortgage taken out on a property that is already mortgaged. Using this type of loan to finance a vacation home isn’t uncommon. You could then use a home equity line of credit for any repairs or renovations.

Finding a property for a reasonable price in a desirable area can turn a loan into both a vacation home and an investment.

Even if your savings account isn’t flush, a vacation home can be a reality. Speak with a mortgage expert to review your finances to see if you can make it work.

Only a few months later and we’ve experienced a significant interest rate hike from the Bank of Canada. To compound matters, other lenders have followed their lead and increased their interest rates.

This hike should affect all loans and saving products sold by Canadian banks.

What Led to the Interest Rate Increase?

This was the first interest rate hike in years and the resulting fallout is complex with potentially major implications.

Part of the rate increase is due to a rebound in the economy. As oil prices rebound somewhat since its 2014 plunge and the housing market’s dip seems minimal, there are signs that the Canadian economy has bounced back from its recession.

These measures are also an attempt to curb the debt load of Canadians, to spur savings and to strengthen pensions. These all suffered when interest rates were low and people took advantage by loading up on debt.

Where are Interest Rates Headed?

As we’ve recently learned, these things are tough to predict even for financial experts. Remember, pundits called for rates to stabilize beyond 2018 but a hike hit Canadians in July 2017.

Mortgage rates might continue to climb throughout the rest of the year and into 2018 due to North America’s economic expansion. Desjardins Bank has suggested that the rate could reach 5% by 2019.

It might be best to lock into a fixed rate, if possible.

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What will Other Lenders Do?

This will most likely be a case of follow the leader. In fairness to lenders, they have also lowered rates in conjunction with the Bank of Canada when they were not required to. It would be surprising to see any lender not try to keep pace.

There’s no need to panic. As easily as rates could increase, they could also lower or stabilize. This is an opportunity to look for some value in the housing market or to save for longer or at better rates.