13 Sep 2012
Best Mortgage Rates Sept 13th, 2012 & Some HELOC Changes.
1 Yr – 2.74 – 3 Yr – 2.64 – 5 Yr – 2.89 – VRM 2.65%
The new guidelines (B-20) announced by the Office of the Superintendent of Financial Institutions (OSFI) kick in at the end of October and many lenders are changing policies now in anticipation of this. Not ideal, especially for those that decide they would like a home equity line of credit (HELOC), or want to buy a home with 100 percent financing.
That doesn’t mean that you can’t get a HELOC, but the new guidelines limit the maximum amount that you can take out of your home. Under current rules, you were able to take up to 80% of the value of the home as a HELOC. The new guidelines cap this at 65%. The intention is to reduce the ATM effect that was occurring with many homeowners, and contributing to the record household debt levels. We can still refinance to 80% as a traditional mortgage – phew!
The next notable change is that the government now requires a borrower to have a 5% down payment. No longer can the client use 100% financing in the form of a 5% cash back offer to finance their purchase. Some people have great credit, but life happens and they just can’t save enough money for that 5% down and still pay all the household bills. This represents a very small part of the market and for some reason the government thought it would be a good idea to target these borrowers.
So for the majority of Canadians that go to their bank to arrange their mortgage, these options are no longer available.
But, if you deal with a mortgage broker, or a credit union, you will still have access to these products. Since OSFI governs federally regulated institutions (i.e. banks), most lenders fall under this purview. But, credit unions are provincially regulated so they can dodge this bullet and continue to offer HELOCs to 80% loan-to-value, as well as 100% financing.
If you or someone you know is considering any of these borrowing options, then I’d encourage them to talk to their mortgage specialist soon before the major lenders have all changed their policies to comply with B-20. But if the need arises after October 31st, rest assured, we can still explore options. You just need to consult your local mortgage broker.
Lee Welbanks is a Mortgage Broker with Welbanks Financial Group, Lee will be posting these informative “Market Minutes” each week for you to enjoy. Heard about our awesome new home search tool? We’ve opened up the MLS just for you. Make sure you login to our custom Spring Realty Homefinder Tool and give it a spin! Find us on Facebook and Twitter too!
