Are You Using Your Home As An ATM?

Capital Mortgages specializes as a service-oriented brokerage that prides itself on integrity and maintaining a service level second to none in the industry.

Are You Using Your Home As An ATM?

It’s a trend that’s becoming concerningly popular: Many homeowners are now opting to re-borrow all or part of what they have already paid off on their home mortgages in order to finance lifestyle purchases. While some people are extremely vigilant in managing the implications involved in refinancing their homes, there are still a number of risks to consider when using your most valuable asset as an ATM.

Firstly, pulling cash out of your account to pay for other purchases will only serve to push up your monthly repayments to a higher amount than they previously were. This is a slippery slope, as you never know what kinds of challenges you will face in life that might prevent you from affording these installments. If the payments become too much to handle, you’ll risk losing your most valuable asset: your home.

To paint a clearer picture, your monthly repayments would increase because of the extra costs involved in extending your mortgage. These include a valuation fee and legal fees. If you don’t have the extra finances to cover these costs and choose to add them to your overall debt, you will risk paying interest on them over the lifetime of your loan.

Of course, some of us will be extra responsible and will manage to pay back all the equity taken out on our homes within a short period to avoid interest charges. However, too many people end up viewing their home’s equity as a savings account and dip into it to pay for lavish purchases like vacations, aesthetic upgrades, or new cars. In this sense, they begin to treat their homes as an ATM and are unprepared for the onslaught of additional charges that comes along with doing so.

Always keep in mind that home equity is not a tangible concept until you sell your house. Until you do, equity is only a perception of your home’s current value. The only way to eventually monetize it is to either sell your property or take on additional debt and interest.

Interested in learning more about the risks behind refinancing your home? Hop on a call with one of our Capital Mortgages brokers today. 613-223-3888

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