Last day for Home Equity Lines of Credit at high ratios for some lenders today
Posted on Sep 5, 2012 in Mortgage Market Updates and News
Further to my last article written on the reduction of Home Equity Lines of Credit availability http://portalbernimortgage.com/blog_article.php?pid=811 some lenders are cutting off their HELOC applications over 65% loan to value as of today. While there are still a couple of lenders out there offering HELOCs from 66-80% loan to value, the number is getting smaller and smaller.
As mentioned in my last article, HELOCs have been under fire the past few years being reduced from 90% to 80% and now down to 65%. Likely the reason for this continuing reduction is the fact that the debt is revolving and many people build up their balances and don't even begin to pay them down for many years. This makes them a bit of a liability and risk to lenders as typically interest only payments, and no principal, are paid for several years.
Unfortunately many people do use HELOCs responsibly, and those people are now going to have a harder time getting new HELOCs due to the recent changes. Many people use them as part of the popular investment method, the Smith Manoeuvre as a readvancable line of credit, as well as many people use them just to have the flexibility to pay their mortgage off without being subject to a large early pay out penalty.
No matter what the reason you want a home equity line of credit, they'll only get more and more difficult to obtain moving forward. Please call me to find out more if you're interested in submitting an application before changes occur. Those people with current lines of credit over 65% of the values of their homes, will likely be grandfathered by their lenders to keep those lines of credit, so long as the don't change lenders.