With the real estate market constantly in the news, it has drawn the attention of the Canadian government. Jim Flaherty introduced new mortgage rules a few months ago that went into effect on March 18th, 2011. These rules were put into place to help cool off a what seems like a very hot real estate market. With the past few years beating sales records, that has changed.
New rules saying that the government insurance agency CMHC will no longer insure Home Equity Lines of Credit (HELOC’s), has left many wondering where money for renovations will come from. Another change was, 35 year amortization periods were no longer going to be insured by CMHC. Finally, you can no longer pull out up to 90% of your homes equity, but only 85% will be insured by CMHC.
These new rules are meant to affect you. Guess what? They don’t really have to. See the key to all those statements is CMHC. Any A lender or institution that has to insure their deals goes thru CMHC. Equity B lender’s (basically anyone not a big bank) will still offer 35 and even 40 year amortizations. They are usually Trust companies and pension funds looking at real estate as a safe investment that brings in steady returns. These companies are there to compete with the general market restrictions CMHC creates. In fact these new rules are driving business to brokers as buyers no longer qualify with branches.
Guess what else? You can still get HELOC’s. In fact companies like Hometrust offer the Home Equity Visa card with a very attractive interest rate as a 2nd mortgage you can use. These companies will lend up to 95% on refinances on OAC. They charge higher interest rates, but sometimes getting what you need or want at a higher cost is worth it. These options are not for everyone. Consult your specialist to find out what the right approach is for you. Through Mortgage Alliance you have access to all of these.
So do not be fooled by what the news and media are saying. There are still options out there for you. Thinking outside the box and working closely with your mortgage agent will help you achieve your real estate goals. As for the new government rules, I support them. Intervention in markets is sometimes required to curtail speculation and bring back faith and stability. This is better than the other option down south, where if you are going to visit the state of Michigan its cheaper to buy a home then rent a hotel for the week.