20 Mar If you are not leveraging, you are loosing money…

If you are not levering your home equity you may be loosing in quite a few ways.

If you are first time home buyer or new immigrant, you might ask what is leveraging, oh I have never heard this term before? But if you are seasoned investor or flipped homes before, you must already know about leveraging.

If you open any dictonary, you will see defination very similar to one below.

Use borrowed capital for (an investment), expecting the profits made to be greater than the interest payable.

Opportunity cost loss:

The biggest downside to paying off your mortgage early is the large opportunity cost that you’ll face. By this I mean that you’ll be giving up investment returns that might significantly outpace your mortgage interest rate. In other words, why pay off a 3% rate mortgage when you could be earning 10-15% on that money? Of course, one only has to look at the past year to know the answer. Another important point to consider is the effect of inflation. Over time, inflation erodes the value of the dollar.

Historically Low Interest Rates:

With recent changes to mortgage rules and record low interest rates continuing for the foreseeable future, now might be the right time to carry long-term mortgage debt while you concentrate on building up your investments. While paying off your mortgage is a guaranteed, risk-free return, the low cost of borrowing means there’s potential to earn higher returns by investing in real estate portfolio. Real estate can yeild over 10-15%

Boom in Real Estate Market:

Thanks to a strong real-estate market, most homeowners are sitting on more equity than they realize. With leveraging the value of your biggest investment – your home equity – to acquire the vacation property you’ve always wanted, help your kids buy a condo or invest for future greater returns. In a way you might be loosing money by not leveraging. House prices are hitting new highs each passing day and their is no sign of slow down. If you can afford to buy another home by leveraging and you are not doing the same, you are in a way loosing a potential source of income by not tapping the growth you can get with leveraging.

The Bottom Line:

If you need to know that if you have any equity you can leverage, feel free to contact me at 416 414 888 for your real estate needs, for buying and selling.

Other reads which might interest you.

Are YOU Getting the Best Rate?  Must read to negotiate the best deal next time. 

My two cents when for first time home buyers…