With the latest round of changes to insured mortgages, which came into effect July 9th, 2012, it appears that Canadians may have overlooked some changes that they should review more closely for Conventional Mortgages (borrowers who don’t require mortgage insurance)! As early as this coming October, there will be even more changes (as I mentioned earlier this year). This will impact the segments of the market approaching retirement or accessing tax-deductible funds from a line of credit for investment.
OSFI’s final mortgage underwriting guidelines are out, and these guidelines are less concerning than OSFI’s original draft. In many ways this news isn’t as market-shaking, but you have time to prepare in advance and review your plan either to purchase or access your equity through a home equity line of credit (HELOC) up to 80% now instead of 65% later. The Angela Calla Mortgage Team is committed to ensuring you are well positioned in any market!
That said, here is what’s changing (Note: this applies to federally regulated lenders only):
•HELOCs: The maximum loan-to-value on a HELOC will drop from 80% to 65%. This will sting borrowers who leverage HELOCs for productive purposes (eg, as substitutes for open mortgages, or as a low-cost borrowing source for income-generating investments or small business). Lenders can, however, still provide a 15% amortizing mortgage on top of a HELOC, for a total 80% loan-to-value. OSFI tells us: “Existing HELOCs are not affected, but future offerings are subject to the limits.”
Federally regulated lenders have until “no later than fiscal year-end 2012” to comply with these guidelines. That ranges from October 31st, 2012 for major banks to March 31st, 2013 for other institutions. But OSFI expects them to comply sooner, if possible, so we may see some of these changes within a few months, if not weeks. (This is another example of why the Angela Calla Mortgage Team always talks about acting sooner rather than later and not procrastinating!)
There’s no telling yet if provincial regulators will impose the same guidelines on the lenders they regulate (like credit unions). Time will tell and we will keep you informed. We’re always here to help you and those you care about with your mortgage questions and reviews.
Here’s the full Guideline B-20: www.osfi-bsif.gc.ca/app/DocRepository/1/eng/guidelines/sound/guidelines/b20_e.pdf
Angela Calla, AMP Dominion Lending Centres
Host of The Mortgage Show on CKNW AM980 Saturdays @ 7pm