Since the financial and housing crisis that gripped the world in the middle of the last decade, governments across the world have tightened regulations in an effort to reign in lending, and make the market more stable. Here in Canada, we did not suffer the same consequences of the U.S. housing crisis, but over the last few years, the government has taken several initiatives to stabilize our housing market and this has had effects on both institutions and borrowers across the nation. Now that a few years have passed, and the picture has come more into focus, let’s see how these regulations can affect you when going for a loan.
Home equity line of credit
New regulations introduced in 2012 made the amount of money one could get on a home equity line of credit much lower than what it was previously. From a maximum of 80%, the highest amount that someone could borrow from a federally regulated institution was dropped to 65%. This means that you cannot get as much money based on your home or property’s value as you could in the past. A private institution could be your solution to obtaining more funds if you need it to make those repairs, invest in a business, or pay for a college education.
Home buyers must have a down payment of at least five per cent of the price of the home that they are buying. Previously, no down payment was required. If you don’t plan on living in the home that you are purchasing, then you will be required to pay at least 20%. This could limit the size, scope, and value of the home that you purchase because it requires you to have much more cash up front than before. So choose wisely, and make sure to have a sizable down payment before buying your dream home.
Shorter amortization periods
The amortization period is simply the time it takes to pay off a mortgage. The maximum of 40 years has been reduced to 25 years. What this has shown over the few years of its existence is that people who used to qualify for loans now no longer do so. This was implemented to help people not get buried under debts they couldn’t afford. What it means for the consumer is now they are expected to either postpone home purchase or buy less expensive homes.
In short, the new regulations are strict, but generally helpful for businesses and the public. It has, however, made the landscape less borrower-friendly. It is more difficult to get the loans that you might need, and more and more people need to purchase more affordable options. Sky Financial can help you navigate these laws and get the loan you need. So if you are in need of any mortgage related financial services, contact the experts at Sky Financial – The Mortgage Centre.