When two or more people are having a conversation and the subject turns to mortgages, the dialogue is usually driven by these three questions:


•What’s your rate?


•How much is yours?


•How long ’til it’s paid off?

While these are all very good topics, what sometimes gets overlooked is this: How can I make my mortgage work for me?

Putting your mortgage to work is easier than it seems. When you have a mortgage, you also have what is called “equity.” Equity is the difference between what your property is worth and what amount of mortgage there is against it. For example, if you have a home worth $400,000 with a mortgage outstanding of $200,000, you have $200,000 in equity.

While it looks and feels good to have a small mortgage or no mortgage at all, having a mortgage can prove to be quite profitable.

First, it is important to know the difference between high-ratio and conventional mortgages. A high-ratio mortgage is a mortgage that is more then 75 per cent of the home value, while a conventional mortgage is 75 per cent or less. For example, a property worth $100,000 high-ratio would be a mortgage of $75,001 or more, while conventional would be $75,000 or less.

Now, let’s get that equity working for you.

In keeping with the $400,000-home with $200,000-equity example, the maximum mortgage on a property like this, keeping it conventional, would be $300,000. You can increase your mortgage to that amount by doing what is called a “refinance,” giving you $100,000 in cash. You can now use this cash to max out your registered retirement savings plan (RSP) contributions, do some home renovations, and pay off high-interest rate credit cards and other loans. You could also use a portion of this cash to purchase a condo apartment. The cash would be a down payment, and you could rent out this condo and continue building your equity.

Now, instead of having a mortgage of $200,000 as well as other debt with high interest rates, you have two properties, no high interest rate credit cards or loans, and your RSP is maxed out so you can look forward to a higher tax refund.

If you do not need all the cash right up front and do not wish to pay a higher mortgage right away, you could instead get what is called a secured line of credit, or home equity line of credit. This will give you a set limit that you can draw from. In our example, it would be like having $100,000 available to you any time you need. This doesn’t work for everybody, and fees may be involved. Speak with a qualified mortgage specialist to get the full details.

E-mail szilard@mfco.cawith questions.