Want a home equity line of credit? Better act fast..
Posted on Aug 24, 2012 in Mortgage Market Updates and News
If you're looking for a home equity line of credit (a line of credit secured to your home), you better act fast. With more changes coming to the regulations for home equity lines of credit in October, some lenders are introducing the new guidelines ahead of time.
So what are the changes coming out for helocs? Well, some people will recall that not so long ago, you could actually get a heloc up to 85% of the value of your home if you refinanced or put a heloc in place behind your existing mortgage. Well, last year that number went from 85 down to 80%, when CMHC said they would no longer insure helocs. Since everything over 80% by law must be insured by CMHC, this in turn meant that helocs could not be done over 80%. This change specifically made a huge impact because of the large number of monoline lenders out there who 'bulk insure'. Ie, they insure everything whether it's high ratio or conventional. CMHC didn't just say they wouldn't insure gelocs over 80% anymore, they said they wouldn't insure them at all, so that meant that all the lenders out there bulk insuring, wouldn't be able to follow that pattern, if they decided to keep offering helocs. So we went from most lenders offering helocs, to very few, overnight.
We also saw, that the lenders that did continue to offer helocs, began to enforce stricter guidelines for them, than they would their regular mortgages. Making them much more difficult to obtain.
Now, officially coming into play October 31st, 2012, the amount of your home you're able to go up to on a heloc will be reduced again to 65%. This means you have to have significant equity in your home before you can obtain a home equity line of credit. While the official change happens October 31st, many lenders are implementing this change very soon, or already have, to avoid a rush of applications being processed at the deadline.
So, if you're looking for a line of credit on your home, better get that application in now. People will existing lines of credit on their homes over 65% will of course be grandfathered and able to keep their helocs in place, but no new ones will be advanced over 65% as of very soon.
Many people like helocs compared with a traditional mortgage for its flexibility. You can pay it off without penalty whenever you choose, you have the option of only making interest payments, which can make the monthly payments very affordable, and you can keep access to it even if you're not using it, and as you pay it down, so that it's there if you ever need it in the future.
For more information or to find out if you qualify for a heloc before the deadline, please call or email Sharie Marie Francoeur today. 250.730.0239 firstname.lastname@example.org