New Rules for Lines of Credit

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New Rules for Lines of Credit

Home Equity Lines of Credit (HELOC’s) are revolving lines of credit secured by a mortgage over either a personal residence or rental/investment property. In June, 2012 the Office of the Superintendent of Financial Institutions Canada (OSFI) announced changes to the guidelines governing how Federally Regulated Financial Institutions approve and manage their HELOC programs.

Under these new regulations the maximum amount that can be borrowed on a HELOC is limited to 65% of the property’s value (LTV). If the HELOC is part of a mortgage package that includes a traditional term mortgage the total of both obligations can go as high as 80% of the property value provided the HELOC account is limited to 65% LTV. This means you could have a fixed/variable rate mortgage for 15% of the value of the property plus the HELOC product for 65% of the value to take you up to 80% of the value.

Borrowers who currently have a HELOC in excess of 65% LTV won’t be immediately affected by these changes. These accounts will be grandfathered under the old guidelines, but should they wish to modify their HELOC, or a mortgage package that includes a HELOC, they will have to fall under the new guidelines at that time.

While federally governed financial institutions have until their ‘fiscal year-end 2012’ to comply with these changes most have already done so. At this point there have been no changes to the rules governing provincially regulated financial institutions such as credit unions.

Important Reminder Regarding Your Mortgage Renewal

If your mortgage is up for renewal and you are being contacted by your lender to early renew before the maturity date please call or email us before signing the renewal. We are able to give you a quick recap of rates in the market to make sure you aren’t signing for a rate/term that isn’t beneficial for you. Often times your lender will tell you that you only have a very limited time to sign the renewal to pressure you into taking the rate they want. Get in touch with us for a quick 2nd opinion!

If you require any further information regarding this article or any other mortgage matters please contact our office at 604‐556‐3893. Also, as a reminder to anyone looking for a mortgage, we offer 4 month pre-approvals at no cost to you. This means that you can get a rate hold for up to 4 months to protect yourself in case rates rise.

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About the Author:

Alex Kotai
Alex Kotai has worked in the mortgage lending business for over 10 years. His career started at HSBC Bank Canada where he spent most of his time in senior management roles which involved training and managing the sales staff at his branch. After leaving HSBC, Alex decided to open his own mortgage brokerage firm, Your Mortgage Source. Through his company, Alex has access to many lenders across the country with a very expansive list of products.