With all the recent rule changes instituted by the government and Finance Minister Jim Flaherty, there is some confusion around the rules concerning Home Equity Line of Credits (HELOC). We have been asked recently if lenders are still doing line of credits, so to make things clear, I figured I would put this together.
Yes, you can still secure a line of credit on your property to leverage your equity, however the new rules leave you accessing a little less revolving money.
Reduced Loan to Value for HELOC
Previously, if you wanted to borrow against your property on a Line of Credit, you could access up to 80% of the property value on a revolving line of credit. You could also set your payments as interest only (very beneficial for investors). The new rule changes stipulate that you can still access up to 80% of the property value, however only 65% of that can be on a revolving line of credit. The remaining 15% has to be secured with a regular amortized mortgage where you are paying both principal + interest as part of your payments.
General Qualifications for a HELOC
if you have a property with no mortgage (or a very small mortgage) and you are considering using it to fund a larger purchase; because lets face it, HELOC money is really cheap, here are some general guidelines to see if you will qualify.
- Salaried Employee - or Self-Employed with full income documents
- Minimum credit score of 680
- The property being financed is your primary residence
- Your property is located within 50KMs of a major urban center
Value will be substantiated by an accredited appraisal
Of course these are just guidelines, if you are considering a HELOC, contact one of brokers to discuss your options!
As each lender has different guidelines for qualifications, we are very happy to assist you in securing a HELOC at the lender that has the best terms for you. Currently we have access to HELOC products through these 4 lenders: