What are you going to do with all that equity?

What are you gonna do with all that Equity from your recent home assessment? 

There is no question that more and more people have been asking us about the surprise on a huge gains on their personal assessment. 

First off, a lot of people misunderstand how these assessors are covered in the first place. 

That assessment is based on the “sight unseen” value of your home from July of the previous year. 

That means a system takes comparable sales in the area and determines the value based on July of last year in your marketplace. 

It doesn't take into consideration any recent repairs you may have done, or any updates you've done to the property since its last sold.

The most recent data normally an assessment has on hand is the MLS data from the last time the house sold, so for instance, if your house has had major upgrades since you've last sold it or you've owned it for quite a long time, it is assuming that it's in original condition and that depreciation has been taken into consideration on your Property Assessment. 

This makes the vast increase on your property assessments even more surprising, knowing that logically it means that assessments are much lower than what true values are. 

Nobody will question the fact that between July and December of last year, values went up in nearly every market across Canada. 

Now it, by no means, means that it is accurate… the system may have made errors. 

The system may have used data that was incorrect. 

It doesn't mean that your house is worth what is on the assessed value. 

In fact, it doesn't mean it's accurate at all. 

It certainly doesn't mean, as we hear from clients all the time, that your house has already went up 40% in value … and it doesn't mean your house automatically 30% of value is just a barometer of value based on a system last year. 

It also definitely means you shouldn't try to appeal it to get that a little bit higher so you can pay more taxes.

Anyway, what it does mean and what is an unquestionable truth these days is that houses across Canada, and for that matter,

North America, are up in value. 

And it means you have more equity in your house simply because houses have gone up in value vs a year ago… and by no other reason, whether you've done repairs, whether you've done anything to your house.

What you have to think about are just a few things. 

First of all, a lot of people may look at this market and go, “is now the time to sell?” 

“Maybe I should cash out and take that money.”

This could be a useful strategy, especially if you're thinking about downsizing or you're thinking about moving to a market that may be less expensive.

However, remember the market’s up everywhere. 

So, even though you will sell high you will also buy high, so many of the gains that you will have achieved, you'll also see that when buying and so you'll more or less transfer your equity.

It doesn't mean it's a bad idea, but that it’s a worthy consideration. 

In fact, this is the same logic that I would say to somebody that's selling a home feeling the market is depressed. 

They're selling low but they're buying low as well. 

Now, the worthy conversation is whether or not the equity in your home needs to be put to work. 

We put up blogs and videos on this all the time. 

But now is the time to review your equity options. 

If you haven't already, even if you look at doing a refinance or did a refinance in spring or summer of last year, it may be time to relook at that again. 

The first thing you ought to look at is if now is the time to do renovations. 

If you are up for major renovations such as your roof, such as your siding, or things that are big ticket items, now's the time to get that cash at a very very low cost to you. 

Down the road, it might be more difficult to finance those repairs that you inevitably have to do. 

Of course, now it's also time to think we're updating that flooring, that painting, that floor plan, all that type of thing in your home.

 
But you can look at more unconventional ideas as well: Is now the time to add an addition? 

Is now the time to add an extra suite? 

All of those things will achieve extra income in your house that could more than pay for the nominal $50 $100 extra you're paying on your mortgage payment. 

If we move off of renos, now's the time to look at any high interest debt that you might be carrying. 

Maybe it's credit cards, maybe it's car loans, maybe it's student loans…

Now's the time to roll those into the mortgage at a lower rate. 

Now you'll hear people say that this can be a problem in doing so. 

As you don't really pay off the debt, you just move it. 

Now a more higher level strategy on something like this is to say I'm going to continue to pay the same amount of money but have that money applied to my mortgage. 

So I'm paying it off at a much more aggressive rate, meaning I'm going to pay it off faster and cheaper, paying less interest over time.

After that, you ought to look at the fact that there could be some opportunity to leverage your equity for other investments. 

Certainly business investment can make sense. 

Certainly there could be some investment you could be making in all types of things. 

These ideas, with the help of a good qualified professional, may make sense for you. 

But in particular, now may be the time to look at other real estate investments. 

Maybe you're thinking about buying a piece of land.

You could maybe buy that piece of land with cash from taking the equity out of your home. 

Maybe you're thinking about buying that second home, which might be a condo for kids to live in during the time they go to college. 

Or maybe it's a home that your elderly parents will live in for a while. 

Or maybe it's a second home you're going to be using for a recreational basis. 

Maybe that's a beach home or maybe that's a ski home. 

All of these things are options that you could utilize the equity without tapping into your hard earned savings or other investments you might have that could cause you very dearly when it comes to taxes. 

It's a good idea for you to get a hold of us so we can review all your equity options and make sure that you are doing things that may make a lot of sense in order to achieve your wealth goals in the next coming year. 

Don't wait until you've missed out on further market gains. 

Let's make sure we go through some options today and see what makes sense for you. 

Now of course, you may also decide that now's the time to take advantage of low interest rates and aggressively pay off your mortgage to be mortgage free faster. 

That of course is an option too, but again this is why it makes sense to schedule a time so we can go through some great options and see what works best for you.


Schedule your call today!