The Office of the Financial Institution Supervisor (OFSI) implements new guidelines for certain types of real estate loans, including equity mortgages, reverse mortgages, and mortgages associated with mortgages. The biggest change targets the so-called combined loans, which are conventional mortgages combined with renewable credit lines known as HELOCs, in which homeowners can dive as they please, without having to repay this section on any schedule. The new regulations will take effect when a repayable loan exceeds 65 percent of the value of the underlying home. At present, an owner can technically borrow up to 80 percent on such a loan, but the new rules will operationally reduce this ceiling to 65 percent, forcing the borrower to start repaying part of the principal if it exceeds this. the limit. If this happens, the change will mean that when the value of the loan exceeds 65 percent of the home, the loan “will function more like a traditional mortgage where the borrower makes capital and interest payments up to [loan gets back below] “65 percent,” an official told CBC News in a technical briefing. The new rules will not take effect until the end of 2023, but OSFI says that as things stand now, data from the Bank of Canada shows that there is a $ 200 billion HELOC that is currently outside this limit. 65 percent. That’s $ 1.8 trillion of the total housing debt. Consumers will not see an increase in their monthly payment requirements as a result of this change, the official said, and the changes will not affect new home buyers. CLOCKS An increase in interest rates leads to more expensive mortgages:
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Changes in equity and reverse mortgages
The regulator also confuses the rules for equity mortgages and reverse mortgages. Common stock mortgages are programs that combine home buyers with third parties to help them find cash for a down payment in exchange for a share of equity.
The federal government launched a joint stock capitalization program in 2019 and nonprofits and other community groups have since developed their own version. OSFI’s announcement on Tuesday is not a new rule change, but a clarification of existing requirements: that such products should in fact be legal equity shares – not just another loan – and that they should be “on an equal footing with the borrower”. equity, “the official said.
The final announcement governs so-called reverse mortgages, which allow homeowners to access equity in their homes in advance without having to sell. The popularity of such loans has exploded in recent years, mainly because they usually do not require repayment of any part of the loan until the landlord decides to sell.
The new guideline limits the amount a homeowner can take on a reverse mortgage to 65 percent when they start.
