HELOC or Home Equity Lines of Credit are famous, but several homeowners may think that they might not get a HELOC this 2019 because of the recent reports and changes regarding HELOCs.
What is HELOC?
For those who don’t know, HELOC is the second mortgage that provides you access to cash based on your home’s value. You may draw from HELOC and repay some or all of it monthly like a credit card. Through HELOC, you basically borrow against your equity. This is the value of a home minus the money you owe on primary mortgage.
It means that you might lose your home to foreclosure if you do not make payments because you are using the property as collateral. It can also mean that you need to have lots of equity to get HELOC. Usually, HELOC enables you to borrow up to eighty-five percent of the value of the home minus the money you owe on loans.
A good reason to get a HELOC is for something like a remodeling or major repair project, which increases your home’s value. A reason why you should not get HELOC is the risk to lose your house if you cannot pay back the money you borrow.
Tighter Regulations on HELOC
Experts say that there’s a concern about high debt-servicing costs that are caused by increasing interest rates. Interest rates are rising continually because lots of them are in debt and manage to pay their interests only. They also mentioned that since consumers barely make regular payments, they’ll likely have a huge challenge paying high payments monthly unless they start to pay more of the HELOC debt.
The concerns over HELOC’s future are shared by some market watchdogs. HELOCs were marketed by banks initially as a way to get funds for house renovations and some similar financial requirements easily. This is the reason why some apply for it. However, changing HELOC policies may affect lots of people and most of them are not yet prepared for higher monthly payments required.
What Can Happen This 2019?
It was said that policymakers are quite anxious to pull reins on HELOCs these days to avoid huge problems in the long run. It’s just a matter of time before Home Equity Lines of Credit gets new restrictions since both FCAC and Bank of Canada start looking into it. Policymakers must keep in mind that HELOCs are frequently used by individuals as financial fall-back and trying to resolve debts through over-regulation is like regulating a heart disease through telling everyone not to eat any French fries. Things would only get better once people take more personal responsibilities.
It might be more challenging to qualify for HELOC with a particular bank once the changes rolled in this 2019. However, if you really need to get HELOC, never hesitate to contact or ask for professional assistance to know more about Home Equity Lines of Credit and what you can do once changes rolled in.