Toronto Real Estate | HELOC Policy Changes | 2018

Toronto Real Estate | HELOC Policy Changes | 2018



coming up in today's video we got heat locks policy changes under the radar today we're talking about what could be a game-changer for people applying for a new mortgage when you have a heat lock coming up next stay tuned Michael James ACK welcome to the channel and if you're new to the channel make sure you subscribe hit that notification button for more market updates with Canadian real estate specifically Toronto real estate now getting in today's we're talking about heat locks and a policy change that happened on Tuesday and it was kind of done under the radar which is kind of suspicious but more or less we're gonna be talking about how this is gonna affect the real estate moving forward and what it all means all right for those who don't know a heat lock is a home equity line of credit which is essentially it's a loan that you can use if you don't use it you're not paying for it it comes with lower intake because essentially it's backed by your property now this has been widely used or been you know it's a growing thing over the last couple years because banks have been using this to get more business essentially now you know and they've been promoting it hey it's not gonna affect you and all that like only you know if you use it you're gonna make your payments and yah-yah-yah do you pay your interest but Essentials not gonna affect you so they've been advertising this for the last and it's been growing really big so essentially what's happened though is there's been a policy change in TV which is the biggest heat lock player in Canada made this policy change along with you know RBC is making this policy change now essentially this policy change is a big deal because up until now he locks you know and because real estate's grown so rapidly he locks a bit more you know pushed out because essentially if you have you know a $400,000 house and you know it's almost paid off a hundred thousand left you know there's room to play there that they give you this loan that you know if you use it they can make some more money off you now where people have been using this is mainly for the you know down payments for more property to get out of you know they put the 20% down you know get out of high insurance premiums you know or you know give money to their kids for them to buy property so he locks are definitely a big player in and when you look at real estate as a whole and that's why we look at our debt it's staggering growing growing growing because these heat locks have been promoted and people have been using them which is good but with this policy change might affect you know it's a game changer the way I look at it now this new policy change who is this gonna affect essentially what this change means is you're gonna stress test you when applying for a new mortgage and how they're gonna do that is whatever your heat lock max value is they're gonna assume that you're gonna max that out so that payment is going to come into effects for your income that you can afford that second you know mortgage or whatever you're buying or whatever you're doing so essentially they're gonna stress test anyone with an existing mortgage and a heat lock that want another property and if they're able to afford that now when you look at the numbers for the average borrower that has a line of you know of a heat lock of two hundred thousand what this means is when you go to apply for that new mortgage that they're gonna have to prove that you can afford additional payment of twelve hundred dollars now what this is gonna do is either one bring your buying power down or essentially you know make it you know max well where you can't even buy that second property because $1,200 for you know many people is gonna definitely hurt them on their buying power now why they're doing this you know they're doing this for the sake of they're being proactive because when rising interest rates you know heat locks are affected with and you know all loans are affected but they're just being proactive so that at some point as and we all know interest rates are going up with the economy being so well they're just being proactive so this is something they should have been doing for forever but they know their numbers of what people are doing with these and essentially did not want to hurt the market but now they're doing it so it's something that everyone you know who has a mortgage now is gonna keep that mortgage with it in with that heat lock and whatever they're gonna do with it it's gonna be affected now obviously this is gonna affect people with heat lock so if you do have a heat lock there's a few things you can be doing in terms of when you're applying for that new mortgage one you can close your heat lock which like I said to me is an option but that's probably your last option you want to be doing your first officer is gonna be just use a different lender that doesn't apply this policy change now right now you have TD are you know RBC these guys are doing it it's only a matter of time till everybody does it so keep that in mind if you are looking to do Sun you want to move kind of fast on this because you might have a few months might have six months but who knows right these changes come pretty fast now you can reduce your heat lock to make sure that you you know pass the stress test you know that's obviously a fair option you can now you can get your heat lock and turn that into just an advertised mortgage to me it kind of defeats the purpose because usually when you have a heat lock you have it for flexibility you could pay it off fast right away you don't pay any fees and all of that just playing you you know pay your interest that you've been paying on it and essentially you know you have for that reason now banks have an advertising this stuff for years he locked because like I said they're trying to drum up sales but at same time they use it to secure your business because when you go in there and they pitch you this idea obviously they're gonna make some money off of you but at the same time when it comes down for a new renewal of your mortgage you know they ten like instead of when you go somewhere else when you have an outstanding you know heat lock summer you're gonna pay you know fees and all that with that new lender so they use it to secure more business so that's why they've been pushing it really heavily for the last couple years and the same time with real estate growing and people not borrowing they just hate use this line of credits this you know essentially this money available to you and just you know pay it back as needed as long as you're making minimum payments and all that similar like you know any line of credit or just you know like a credit card type thing with much lower interest because it's secured back by your real estate guys I want to know your opinion on this do you think this is gonna affect the markets obviously I think the second you know cottage and rental market and investment stuff like that's gonna be affected so I like to hear what you think like comment share and we'll catch you on the next one guys take care

9 thoughts on “Toronto Real Estate | HELOC Policy Changes | 2018

  1. More about HELOC https://betterdwelling.com/canadians-withdrawing-home-equity-is-accelerating-again/ of course it will effect the market Canadians Secured Over $290 Billion In Loans Against Their Homes
    The total amount of debt secured with residential real estate reached a new record. The outstanding balance hit $290.98 billion in August, up $1.29 billion from the month before. The annual pace of growth reached 4.42%, nearly 2 points higher than it was last month.

  2. I don't think this will affect the markets at all due to the fact that anyone with these 200K, 300K, 300K "available credit" HELOC's or whatever can just reduce the "available credit" limit with the bank any anytime. Not a big deal and over exaggerated IMO. Nothing but doom and gloom ammunition to rant on.

  3. The latest luxury sales report: Toronto single Detached sales

    1-2 M (that's not luxury BTW) is down -35%

    2-3 M is down -50%

    3M+ is down -44%

    Vancouver
    single Detached
    1-2 M (that's not luxury BTW) is down -35%

    2-3 M is down -22%

    3M+ is down -45% http://blog.bestagent.ca/wp-content/uploads/2018/10/2018-Luxury-data-table.png

  4. Another report https://vancitycondoguide.com/canadian-regulators-curb-heloc-growth/?fbclid=IwAR0OETUH8ovnSzUoGlROT8q0E5BRjKrcR53qb1yxZ2g8DY4LT9cRPhlUNWY

  5. Here is more details about the impact of this change https://www.ratespy.com/heloc-rule-changes-more-significant-than-you-think-11087251

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