New Canadian Housing Rules – CMHC to Withdraw Insurance on Home Equity Lines of Credit
Those who were planning to use their home to get a line of credit for financing home improvements, education and other big ticket items will soon be in for a rude awakening.
This article is the final article discussing the Canadian Governments announcement two weeks back concerning CMHC lending guideline changes to high ration mortgage products. This article focuses on the portion of the announcement that dealt with the Governments plan to withdraw high ratio insurance on line of credit products.
Usually when consumers plan big ticket financing they will turn to their home for the financing. Home Equity Line of Credits are appealing because they offer flexibility and you don't have to advance all the money if you don't need it.
This change will mean that if you go to your bank for a home equity line of credit it won't be available to you if you require high ratio mortgage insurance. Likely, the bank will suggest that you refinance your mortgage.
Now just because the government has announced that they will no longer insure these line of credit mortgage products, doesn't mean that you can't obtain one.
Many mortgage brokers work with Trust Companies and Finance Companies who offer line of credit products that don't require high ration mortgage insurance. One example is Home Trust. They have been offering a high ratio mortgage product for years that does not require CMHC insurance!
They are many deals out there, you just have to find them.
What remains unclear is if CMHC will back out of high ratio lines of credit that come up for renewal. If you currently have a high ratio line of credit (that has been fully utilized) it may be a good time to start thinking about talking to your bank or mortgage broker about refinancing your line of credit balance in with your first mortgage, before all of these changes take effect.
At the end of the day, the Government changes are positive because they promote a more conservative approach to lending and borrowing which will ultimately be the future reason that Canada is less impacted by the effects of a global recession like the one we saw recently. For more information about the new Canadian Housing rules and CMHC's plan to withdraw insurance on home equity lines of credit visit www.trueassess.com.
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Further to last week's article and Ministers Flaherty's announcement last week concerning changes that are being made to CMHC lending guidelines as it relates to mortgages that are high ration insured by CMHC.
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