How mortgages have changed

How mortgages have changedIf you’re like millions of Canadians, you’re busy paying down your mortgage. It could take 25 years or so, but it can be a great way to accumulate personal wealth, especially if house prices rise. However, with changes to mortgages in recent years, it’s important to understand just how they are different if you want to fully benefit from your home’s potential to build your personal wealth over the long term, rather than your debt.

Today, to finance your house most banks will offer you a readvanceable mortgage if you have a down payment of 20 per cent or more. It combines a traditional mortgage with a home equity line of credit (HELOC). There’s a big difference between these two forms of debt.

First, your mortgage debt only goes one way — down — because you must make regular payments against both the interest and the principal borrowed. This increases the equity you have in your home, meaning the difference between what you still owe and the value of your home.

But as you pay down your mortgage, a HELOC lets you borrow against your growing equity as part of your mortgage. Unlike your mortgage, you only have to make regular payments against the interest. You can ignore the principal until you sell the house. This short-term credit advantage can mean a long-term debt problem.

With flexible repayment terms, low interest rates and a credit limit that rises with your equity, a HELOC can be used to pay off other, higher-interest debt or home renovations.

But would a HELOC tempt you to use your home like an ATM? Mounting HELOC debt could put you at increased risk if you lose your job, get sick or injured, interest rates go up or your home decreases in value. If it consumes too much of your equity, you might end up owing more than your home is worth, lose your home or have to sell it to pay down your debt.

To use this borrowing tool wisely, stick to a plan to pay it off fully and avoid continually borrowing against your home equity.

Learn more online at canada.ca/it-pays-to-know.

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House hunting or selling your home? Check radon levels

House hunting or selling your home? Check radon levelsOne of the biggest mistakes both buyers and sellers make is not testing for hidden health hazards. But if you’re a buyer, you want to make sure that your new home will provide a healthy living environment for you and your family. If you’re a seller, showing that your home is free from certain dangers can help close the deal and offer potential buyers peace of mind.

One hazard that Health Canada is recommending that all homeowners test for is radon, a radioactive gas that comes from uranium in the ground and can get into a home undetected.

Since long-term exposure to radon is known to cause lung cancer, it’s a smart move to check its levels. Testing is simple — you can either purchase a do-it-yourself test kit or hire a certified radon measurement professional. The DIY kit will include instructions on how to set up the test and send it back to a lab for analysis once the testing period is over.

To get a realistic estimate of the radon exposure, all measurements should be made in the lowest lived-in level of the house where people spend more than four hours per day. Potential measurement locations include family rooms, living rooms, dens, playrooms and bedrooms. A lower level bedroom is preferred because people generally spend more time in their bedrooms than in any other room in the house. Similarly, if there will be children in the house, lowest level bedrooms or other areas such as a playroom are preferred.

Health Canada recommends a long-term test for a minimum of three months. If you’re selling, this means you should complete the test before listing your property. If you’re buying, you will need to make sure there is enough time to complete the testing or request that a clause be added to the sale agreement to allow for high radon levels to be fixed. The cost of a radon reduction system, if needed, is very small compared to the cost of the home.

A dream home doesn’t become a nightmare if it tests positive for high radon levels — techniques to lower radon levels are effective, affordable and will improve the home’s indoor air quality. A radon mitigation system can be installed in less than a day, and in most homes will reduce the radon level by more than 80 per cent for about the same cost as other common home repairs such as replacing the furnace or air conditioner.

Find more information at www.canada.ca/radon.

www.newscanada.com