Fred: Welcome to the Scotiabank “Find the Money” podcasts . I’m Fred Ketchen, Director of Stock Trading for Scotia McCloud. These monthly podcasts call on some of Scotiabank’s most knowledgeable experts to help you make the most of your money. Here we'll discuss strategies designed to put you in the financial driver’s seat. Today we’re speaking with Alison Strimas, who’s the Vice President of Mortgages at Scotiabank and Michelle Power, Branch Manager at Kingston’s Princeton & Bagot branch. We’re going to be discussing how using the equity in your home can really help Canadians get the upper hand with their borrowing.

Alison, let me start with you, what can Canadians do to make sure that they have the upper hand on their home financing?

Alison: Even in this day and age, Canadians consider the purchase of a home one of the biggest investments in both themselves and their future; and the home financing piece of it is still a very daunting experience for them. Our customers tell us that they want really, really good advice. They want to be able to feel good about the decisions that they make and really take control of their borrowing. I think one of the best options for our customers is to leverage the equity in their home and that way they can truly feel like they’ve got the upper hand over their borrowing.

Fred: And what are the benefits, then, for Canadians to borrow against the equity in their home?

Alison: There are a lot of different benefits but one of the key benefits, I think, is lowering their overall borrowing cost. When you’re lower your overall borrowing cost that means you’re paying less interest and that in turn is better cash flow management as well as making funds available for things like saving for your children’s education, an RSP contribution or even a long overdue vacation. Now how we help our customers do this is we offer what’s referred to as a Scotia Total Equity Plan. This plan gives you a global credit limit and it’s based on the value of your home. You can use the borrowing limit for mortgages, which most people do, but the other part of it is that you can have other borrowing products underneath it like lines of credit, credit cards or loans; and the nice thing is, is that you apply once and that’s all you have to do. So if you need the credit, you can use the credit, if you don’t need the credit, you don’t have to use the credit; and the nice thing is the equity in your home grows so does the ability for you to diversify your types of borrowing.

Fred: Let me turn to you, Michelle. When is it most appropriate to use the equity in your home for borrowing?

Michelle: Traditionally, what we’ve seen is two main reasons why clients use equity in their home; the first one being lowering interest costs and the second one being of course diversification of a borrowing strategy. Primarily what we have seen is larger purchases are done through home equity lending in terms of renovations, whether it be kitchen renovations or purchasing second properties such as summer homes or income producing properties. Another thing that we’ve seen quite frequently is a financial planning tool. Customers are starting to use it as a financial planning tool in terms of leveraging investments to reach retirement goals. But it makes sense to allocate your home equity between line of credit and credit cards in addition to your mortgage; diversifying your borrowing so that you can have the right financing options to meet your needs including short term goals such as vacations and even every day purchases. It depends entirely on individual objectives.

Fred: Given that, how can Canadians access the equity in their home for all of their borrowing, is it a complicated process?

Michelle: No, truly, it’s simplistic as applying for credit. Generally, it’s done in three steps; the first one being qualifying for the amount of credit that you feel best suits your needs, the second one being establishing a fair market value for your property which is traditionally done through an appraisal process, and the third one being structuring the product that best suits your goals underneath. The greatest appeal to this step as Alison had said was you apply only once so the equity is there when you need it and the product evolves with your ongoing borrowing needs.

Fred: Given all these things, Alison, how much can people borrow?

Alison: You can actually borrow up to 90% of the value of your home, and, you know, typically out of that 90% a large portion is taken up by a mortgage. But what is available, the rest of that is available, you can use for the products that Michelle has just been mentioning. Now the equity in your home quite simply is just the value of your home minus the outstanding mortgage.

Fred: Let me turn back to you Michelle. What happens when people borrow against the equity in their home, does it mean that you won’t see your mortgage balance going down every month?

Michelle: Certainly not. As you pay down your mortgage your equity automatically increases. Most commonly what we’re tending to see is, customers tend to have a revolving and a non-revolving element to their borrowing needs now. What this allows you to do is build equity and reduce debt with a non-revolving component and also gives you the flexibility and the low interest rate that comes along with a revolving piece which would be a line of credit. Frequently, we see that customers are starting to actively manage their own borrowing now and a great example of this is changing products within the equity plan from a line of credit to a mortgage product; and what that will allow you to do is structure installment payments on a fixed rate and also allows you to build equity through monthly debt reduction and gives you better control over household cash flow. It’s a great example of flexibility that’s afforded by equity borrowing strategies.

Fred: How do people determine if it’s right for them?

Michelle: Individuals are different and everyone has a unique situation, but I would suggest that you get advice from a trusted advisor and find the right financing solutions that give you the upper hand with your borrowing strategies.

Fred: Thank you Alison and thank you Michelle for sharing with us this valuable information on how using the equity in your home can really help give Canadians the upper hand with all their borrowing. We hope you found this information helpful in learning why and when accessing the equity in your home might be right for you and how simple the process can be.

Thank you for joining us. I’m Fred Ketchen. For more information, contact a Scotiabank branch or a local mortgage specialist, we’d love to have the opportunity to talk with you.