How to lock in that home equity before bubble bursts?
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Thread: How to lock in that home equity before bubble bursts?

  1. #1
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    How to lock in that home equity before bubble bursts?

    My parents live in Vancouver and paid off the house decades ago. Their home value went from $1 million in 2013 to just under $2 million. Knowing that it's an eventuality that this value will evaporate when the bubble bursts, is there any way to "lock in" that windfall (ie mortgage?) without literally selling the house and moving elsewhere?


  2. #2
    Senior Member none's Avatar
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    No.

  3. #3
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    How about exploring if a reverse mortgage would achieve what you want?
    We can not know things as they are in themselves, but only as they appear to us.

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  5. #4
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    A reverse mortgage would only give you about 40-60% LTV, then the interest would eat up the remainder.

    The only way to ever lock in your gains, and this applies to every investment out there, is to sell the investment.

    The best you could do is get a heloc (margin the asset) and invest the money elsewhere. Hopefully your leveraged appreciation outgrows any depreciation you may encounter.

    For example, if you own 1 house for 100k, which you paid off, and the market corrects 50%, you now have only 50k.

    If you leveraged the property 80%, bought 4 more with a 20% downpayment, you now own 5 places worth 100k each. Assuming you paid them off and the market corrects 50%, you now have assets worth 250k. Of course, you used other people's money to pay off the 4 rentals...

    The above is a hypothetical example, full of all sorts of potential problems and assumptions. It's meant to illustrate a single concept, don't be confused that it is a "always works, win-win" situation.
    Last edited by Just a Guy; 2016-04-18 at 09:41 AM.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

  6. #5
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    Quote Originally Posted by gentlepuppies View Post
    without literally selling the house and moving elsewhere?
    Selling the house and renting elsewhere.

  7. #6
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    You can hedge your gains by shorting the market.

    Buy credit default swaps, or some LEAP puts on a Canadian REIT or even the banks.

  8. #7
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    Sell it and lease it back.

  9. #8
    Senior Member Causalien's Avatar
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    Like the American investors found out. There's no way to short the Canadian housing market without some complex maneuvering. So there's no way to take a profit without selling a house.

    I took the plunge and sold.

  10. #9
    Senior Member tygrus's Avatar
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    Take out a HELOC and invest it, deduct the interest. If things fall, the bank isnt likely to call it in unless you cant service it.

  11. #10
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    Quote Originally Posted by gentlepuppies View Post
    My parents live in Vancouver and paid off the house decades ago. Their home value went from $1 million in 2013 to just under $2 million. Knowing that it's an eventuality that this value will evaporate when the bubble bursts, is there any way to "lock in" that windfall (ie mortgage?) without literally selling the house and moving elsewhere?
    If your parents are happily living out their final days in the house they have lived in for decades and they do not owe any money on it, why are you so concerned about locking in a what you believe is a windfall?


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