Changes for Re-Advanceable Mortgages
This post is sponsored by one of our Trusted Partners, Green Mortgage Team. To become a contributing editor, please contact our Real Estate Investor Solutions Specialist, David Maxwell at david@reincanada.com.
If you use a re-advanceable mortgage for the Smith Manoeuvre or real estate investing these regulatory changes apply to you!
What is a re-advanceable mortgage?
A re-advanceable mortgage is a Combined Loan Plan (CLP), a mortgage product that has an attached Home Equity Line of Credit (HELOC).
How does it work?
The principal portion of your mortgage payment decreases your mortgage princal while simultaneously extending and increasing your HELOC limit.
Why are they changing?
The biggest concern with these lending products is the re-advancing of credit above the standard 65% Loan-to-Value (LTV) Limit. Products like these increase risks to lenders and borrowers.
How are they changing?
Based off new OSFI rules re-advancing lending products won’t exceed a 65% LTV and borrowers will need to pay down the total loan down to 65% before the loan begins re-advancing.
When is it changing?
It will be implemented with Federally Regulated lenders at their Fiscal Year End or on October 31, 2023.
How does it affect me?
If you owe more than 65 % LTV, you’ll see a gradual period where a portion of your principal payments go towards reducing your overall mortgage amount until it’s below 65% LTV, this portion won’t be re-advanceable.
For most borrowers using CLPs, these changes have little to no effect on the way they use this product.
If you get a CLP or re-advanceable mortgage prior to October 31st the change to the product structure will not be until your next renewal.
If you use a re-advanceable mortgage for the Smith Manoeuvre or real estate investing contact Green Mortgage now before these changes take effect.
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