Equity is a major topic of discussion when it comes to your financial security. In real estate, it almost always refers to buying a house. Standard wisdom is to get into the market sooner rather than later, even if it means a few compromises on your wish list. 

There is another side to this conversation, though, and it has everything to do with the house you already own. The value of your primary residence can have a substantial impact on your purchasing power, whether you decide to sell it or stay forever. Today, we’ll talk all about how to make the most of your existing property. 

Curious about how much your house might earn if you sold in today’s market? Find out by booking your free home evaluation with our Midtown real estate agents. 

How to Calculate Your Equity

Equity calculations are simple, but there are nuances to consider. There’s your overall equity that includes all of your assets, not just your home, but your investment accounts, any business interests you own, and even artwork and jewellery that have financial value. 

Home equity just considers your home and any secured debts associated with it. Take an accurate estimate of its current value, minus what is left on your mortgage, and that will tell you how much equity you have built so far. 

Unsecured debt, like credit cards or loans to purchase a new furnace or appliances, doesn’t impact your equity. However, they still affect how much funding a lender will be willing to provide. To get a clearer picture of your overall financial position, consider your total equity; add up the value of all of your assets and then subtract all debts.

Is it time to start the search for a new Midtown Toronto home? If so, the posts below can get you started: 

The Importance of Resale Value in a Home

Even with no intention to sell, most homeowners take pride in their property, especially in Midtown Toronto. Everyone wants to live in a home that is in good condition, up-to-date, comfortable, and aesthetically pleasing. 

Financial considerations should also be a high priority. The monetary value of your home isn’t cash in the bank, but it is a significant component of your overall net worth. 

When home prices drop, your financial portfolio also takes a hit, at least on paper. Long-term ownership means you can withstand normal market fluctuations, but it still pays to protect and enhance your equity as much as you can. Maintaining property value is critical if you ever need to borrow money using a Home Equity Loan (HEL) or Home Equity Line of Credit (HELOC). 

To illustrate, imagine you are thinking about purchasing an additional home, and you have $500,000 remaining on your existing mortgage. A HELOC is limited to 65% of your equity. 

Compare your purchasing power with a primary residence that is worth $1.5 million versus one valued at $1.2 million. Subtract the $500,000 still owing on your mortgage from the total value of your home. Now take 65% of the remainder.  

  • Based on these calculations, you can borrow as much as $650,000 against the $1.5 million home.
  • You’d have access to a maximum of $455,000 on the $1.2 million property.

This variance makes a difference in what you can purchase next or what upgrades you can make to your existing home. 

Planning to sell? The posts below can help optimize your results:

Equity-Enhancing Home Improvements

The surest way to build your equity is simply to give it as much time in the market as possible. Toronto real estate values can rise and fall, as the last few years have demonstrated! That said, prices have always increased when looking at long-term trends. Hence the advice to first-time homeowners to buy as early as you can. 

You can also enhance the value of your home through carefully chosen, high-quality renovations. Labour and material costs have risen, so it’s essential to run your numbers and choose your projects strategically. 

Equity upgrades are about the math, not the emotion. You can love the result, but that doesn’t mean it adds financial value. 

If you spend $100,000 finishing your basement or installing a heated, in-ground pool, there’s no guarantee you’ll recoup those funds when selling. The only reason to proceed in some cases is if these renos add enough personal joy to make them worthwhile. 

  • Generally speaking, timeless kitchen and bathroom upgrades appeal to buyers, potentially raising the perceived value and final price if you decide to sell. 
  • Buyers may also pay a premium for a home with a secondary suite because of the income possibilities. Done correctly, this can be one of the best home equity renovations you can invest in. 

Whatever path you take, be sure to talk to an experienced real estate agent before scheduling any substantial remodels. We do more than help you buy and sell homes. Thanks to the experienced real estate investors on our team, we can offer detailed guidance on what upgrades add the most value, and what makes next to no impact.

Protecting Your Equity at All Costs

Every house will need care and attention over the years. Just like a car, regular maintenance keeps all systems functioning and in good repair. Projects such as repairing the roof or replacing the air conditioning unit don’t necessarily lead to a higher selling price. Some upgrades are about protecting equity. 

Imagine a buyer tours your home and considers placing an offer. If a home inspection turns up critical flaws in the foundation or in some other major system, your property loses perceived value. A buyer tends to assume the worst when they spot what appears to be a red flag. 

Often, it’s just a matter of relatively inexpensive repairs, and taking care of them ahead of time gives buyers greater confidence in your property. If you do nothing else, taking meticulous care of your home is the best way to guard your equity and increase resale value. In the meantime, you create a welcoming space anyone would be proud to live in for years to come. 

Do you have questions about buying or selling or what upgrades add lasting value? Our Midtown Toronto real estate agents are here for you. Reach out to us at david@batorigroup.com, bobby@batorigroup.com or call (416) 485-7575 to learn more.