Over the past two years there have been a number of changes to mortgage rules with respect to mortgage insurance applications on rentals, refinancing, and lines of credit.
The current focus is on bringing the HELOC loan to value limit down to 65%.
The argument is that higher home equity lines support higher consumer debt which has reach record levels due primarily to low interest rates and the easy access to capital from home equity.
Some of the counter arguments are that home equity lines are a vital financing component for many small businesses that need to draw against their home equity to fund their business activities.
Funds from home equity lines can go into creating jobs and generating profits that will lead to higher taxes paid as well.
Reducing the amount of capital individuals can access will only lead to higher cost alternatives for small business owners.
While certainly not all home equity lines of credit are for funding small businesses, the ones that are not don’t necessarily use the funds to purchase all sorts of consumer goods and trips that they don’t really need or perhaps cannot afford.
With the size of the HELOC market in Canada at around $200 billion, federal regulators are concerned as to how this form of financing will impact the overall economy if interest rates start to climb.
While the regulations to change the lending limits on HELOC’s are only in draft form at the present time, it is expected that the proposed rule change will come into effect in the near future.
So if you have a home equity line of credit today, or are looking to acquire one in the near future, its going to be important to keep up with how the rule changes may impact you now and in the future.
The best way to stay on top of this issue is to work with an experienced mortgage professional who can keep you abreast of any developments with home equity line of credit programs and help you make the best mortgage financing decisions possible for you and your family.