Using your Home Equity to Build Long-Term Wealth

Using your Home Equity to Build Long-Term Wealth

Posted by Brad Speniel | May 22, 2015 at 10:46 am



One of the secrets of the rich is that they habitually look for ways to increase good debt and eliminate bad debt. Good debt is used to make an investment that appreciates in value and puts cash in your pocket, while bad debt is used to buy a “doodad” that
depreciates. Your mortgage is an example of good debt because it helped you purchase a house that will rise in value over the long term. Now, why not consider using the equity you’ve built up in your home to create even more value? For example, refinancing your mortgage to invest in revenue property can provide a variety of unique wealth building advantages. Here are a few:

Leveraging your investment

You can purchase a rental property and become a real estate investor by using your home equity as a down payment, and let the bank fund the rest. A tenant makes the payments for you and eventually you will own two homes free and clear.

A balanced investment portfolio

By investing in real estate—along with your existing stocks, mutual funds, bonds, etc.—you’ll have a stronger, more stable portfolio.  That means more peace of mind and security for your financial future.

Tax deductions

Your mortgage interest, property taxes, repairs and maintenance can be deducted from your taxable income thereby reducing your net taxes.

Tax deferral

The appreciation in property value is sheltered from tax until you sell the property, so you can minimize taxes by, for instance, waiting until you retire before you sell.

Ongoing cash flow

Not only will your rental payments help pay down your mortgage, in time they’ll provide a reliable income for retirement!

As you can see, when you invest in real estate, you are taking a smart and effective journey to build your wealth. And once you’ve seen your investment pay off, you will want to keep that newfound wealth growing by investing in more properties. But as your property portfolio grows, managing your multiple mortgages can become time-consuming and difficult. Consider a Mortgage Management System to make your growing investment endeavour easier.

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