Two e-mail messages that stood out yesterday...

Yesterday I received two e-mails that stood-out in my inbox: one from Scotiabank letting me know that they are discontinuing their no-downpayment mortgage; and, the second message came from MCAP (a wholesale bank) letting me know that their maximum loan-to-value on a secured-line-of-credit would only be to 65% of the value of a home, instead of the 80% value traditionally lent.

While I was anticipating these changes later this year, they've come as a surprise because they happened quickly and without much notice.  Normally, when drastic changes happen in lending there is usually a lead-up of several weeks.  This allows borrowers to get their applications approved before the cut-off dates.  This time there was no far-advance warning.

What are the main implications on these changes?

• For real estate investors who would normally use the equity that they've built up in their homes to purchase investments, the amount that they can use from their home has decreased by 25%. Although there are other lenders who will still allow you to access 80% of the value of your home through a secured-line-of-credit, I think we'll be seeing most lenders drop their maximum loan-to-value to 65% down from 80%.
• For those who wanted to buy a house and had good job stability and credit, but have had difficulty saving for a downpayment, their chances of buying a home and getting good financing is limited.  Although there are lenders who will still do "no downpayment" mortgages, we'll likely see this program being cancelled with most mortgage lenders.

Your feedback and comments are welcomed! If you have any further questions that you'd like to discuss please give me a call or send me an e-mail:

Tel: 519-763-3900 ext.1001
E-mail: lastovic.s@mortgagecentre.com
www.guelphmortgagecentre.com