How you can leverage the Toronto housing bubble and your home equity

How you can leverage the Toronto housing bubble and your home equity

Don’t let financial fears or debt hold you back from investing in your home and making upgrades

Toronto consistently comes out on top in the worldwide roster of best cities to live in thanks to its culture, walkability, safety and more. But the luxury of living in this waterside metropolis can come with a hefty price tag, especially for homeowners who might be feeling chained to a mortgage. On the surface, rising home prices in the Toronto housing market might seem benign to those not looking to sell. What it actually signifies is a major opportunity to leverage their home’s equity and access extra funds without selling.

So, what does Toronto’s housing bubble look like right now?

Despite a brief drop in 2021 due to the COVID-19 pandemic, Toronto’s housing market has continued its upward climb, driving GTA house prices up across the board for renters and buyers alike. In the last quarter of 2021, the median sale price for single-detached and semi-detached homes in Toronto reached a record high of $1.38 million and $1.1 million, according to recent data released by the Canadian Real Estate Association. 

The average condo price in Toronto has also shot up significantly. Supply and demand, and low-interest rates, are significant factors in the seemingly non-stop growth of Toronto’s housing market crisis. Little inventory and high demand alongside buyers taking advantage of low-interest rates make the market red hot, driving high GTA house prices. Unfortunately, there’s no end in sight—but not all hope is lost when it comes to home equity. 

What exactly is home equity?

It’s a sellers’ market, but there are benefits for homeowners who don’t want to sell, too. Consumers can take advantage of what they own using a home equity loan or a home equity line of credit. These types of loans allow you to borrow money against your home’s equity. For example, if you own a $700,000 condo and still owe $400,000, you have $300,000 in equity that will continue to grow the more you put down on your mortgage. Equity also rises when the housing market is strong, driving prices up, as has been the case recently. 

Can I pay off debt with my home equity?

Having access to these additional funds can be life-changing, especially for those living in a city that makes debt repayment difficult (ahem, Toronto). One way homeowners can use their home’s equity to their advantage is by paying off debt.

A debt consolidation loan is an effective way to save money while paying off debt. Using a home equity loan, homeowners can consolidate high-interest payments into a single lower-interest payment with a more financially beneficial term, payment, interest rate or loan structure. Ultimately, this type of loan can help homeowners take control of their debt. The current housing market also lends itself to homeowners being able to take out a more substantial home equity loan. 

How can I invest using my home equity?

It’s easy to feel bogged down by debt and bills, despite being bombarded with encouragement to invest, invest, invest. But there is something homeowners might not be considering, and that’s using their own home equity to put back into the market and invest in their financial future. Homeowners don’t need liquid cash to take advantage of new investment opportunities; rather, they can leverage their equity to provide some flexibility. 

Home equity loans can help raise your home’s value

Whether you’re looking to sell or want to stay in your home long-term, home renovations keep your house updated and in great shape for whatever comes. Homeowners can put a home equity loan towards upgrades, like gutting bathrooms or upgrading outdated kitchens. Renovations are a great way to add value, but many homeowners worry about not qualifying for a home improvement loan. 

Harnessing the power of home equity frees up the space to invest, pay down debt and increase the value of any home. Click here to learn more about debt consolidation and other home equity loan applications with Alpine Credits.