If you’ve been thinking about buying a second property—either a cottage, additional home or a rental property—and have a HELOC you’d like to hang onto, you may need to revisit your plans.
In recent weeks, TD joined RBC in changing its mortgage policy. Essentially, if you already have a HELOC, and would like to apply for a separate new mortgage, you need to prove you can pass a stress test based on the maximum limit of that HELOC. Previously, you simply had to pass a stress test based on the outstanding balance.
Basically, this will mean that you’ll have an extra payment listed on your mortgage application—either based on the government’s benchmark posted rate or the lender’s contract rate plus two percentage points, whichever is greater. Again, this new rule change only applies to individuals that already have a HELOC and are looking to apply for a second mortgage.
If you have a question about these rule changes, or if you’re interested in buying a second property in the not-too-distant future, please give me a call. I would be happy to sit down with you and discuss your options.