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New Refinancing and HELOC Rules for 2011 in Mortgages

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Uploaded on Feb 16, 2011

http://LeahCoss.ca
Hi everyone, how are you? It's Leah Coss with The Mortgage Center. Wanted to go through the new rule changes, as of, or, as of announced for January, 2011, but don't actually come into effect until March, 2011. So, wanted to go through rule change number two and three. And kind of just summarize how they may or may not affect you, whether you should or should not care and my thoughts on how they might actually affect the economy and the market around you. So, rule number two, I guess, we'll go through, is the HELOC rule. HELOC stands for Home Equity Line Of Credit. Basically, this is a rule you shouldn't even really panic about at all, because it won't really affect anybody as far as I know. With HELOCs, typically when you go to get one, you need to have 20% equity in your home.
This is what's practiced every day from many of the lenders that I go to, OK. But what the government said is basically: "This is already in practice, so let's just make it a rule." And that's exactly what they've done. If you want to get a Home Equity Line Of Credit, you must leave 20% in your home or have a minimum of 20% in your home. Anything above and beyond that is a part of your line of credit that you can use.
So this rule really won't affect much. It won't affect the industry, the market, as far as I'm concerned. It's just government's way of saying: "We've done something. We've made a change. It sounds good. It's going to help control debt". And even though it's already in practice, now it's law. [laughter]
The second rule is the refinance one. And this is one I know is creating a bit of panic and anxiety in some of you out there. But I do want to reassure you that the majority, and I mean majority of you, will not be affected by this. If you are getting good advice from a mortgage broker or a banker, any time that you go to refinance your home, they should be advising you to leave 20% in your home, no matter what.
The reason being is, the moment that you step down below 20%, you now have to succumb to CMHC or Genworth mortgage insurance fees. So essentially what they're saying is: "Oh, you want to take out this extra 5, 10%? No problem. It's going to cost you an extra 3%."
See what I mean? So that doesn't make a lot of sense paying for money that's your own. You may as well leave 20% in there. For one you're safer, you're better off and you're avoiding all of those fees. Now that said, what was the change? Well, last year, 2010 in April, there were changes that took it so that if you did want to refinance your home, it went from you have to leave 5% in your home to you must leave 10% in your home.
This year they've made the change so now you must leave 15% in your home. But again, if you're getting good advice, that won't affect you because you're going to leave 20% in your home in any case. The only time you should be refinancing below that is if you really, really, really, really need the money. But if you're just looking to consolidate, I don't necessarily recommend taking it below that 20% border line. OK?
So those are the two rules. I don't feel that those two rules are going to make a massive effect in the market. I don't think that they're really going to affect too many people. Unfortunately, the refinance rule will only really affect people who are desperately in need of extra money because of some circumstance that's happened. So, unfortunately they will be affected, because they cannot access as much equity in their home as what they had originally hoped. But, you know, there's always going to be someone who is going to get hurt out there.
If you are really, really, desperately in need of getting some extra money, give me a call. I might be able to troubleshoot with you, or we might be able to find money that's somewhere else. But I'd love to be able to at least help you bounce some ideas off of me and hopefully I can be of help.
If you're concerned about these rules of if you have an opinion about these rules that differ from mine, I'd love to hear from you. Leave a comment down below. And if you are worried about getting qualified after these new rules, because of the amortization rule that changed or anything like that, give me a call.
There's a lot of people who are posting their homes or listing their homes for sale right now, so it's a good time to jump in with a lot of selection. And get in before March. So, Leah Coss with The Mortgage Center. If you have any questions, hopefully I will be hearing from you soon.

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