Archive for December, 2012

What is a Readvanceable Mortgage?

Wednesday, December 19th, 2012

A readvanceable mortgage is a feature of some mortgages, including HELOCs (home equity lines of credit).  They are made up of two parts:

1.  The “mortgage” portion
2.  The Line Of Credit (LOC) portion

Each time you make a mortgage payment, your lender increases your LOC by the amount of principal you pay off .
For example, if your monthly mortgage payment is $600 ($500 interest + $100 principal) your LOC will increase by $100 each month.
With a readvanceable mortgage, as soon as you make a payment you can “borrow back” whatever principal you’ve paid. The more payments you make, the higher your line of credit.
Readvanceable mortgages are an option for those needing a growing source of funds for:
o    Investments
o    Education
o    Emergencies
o    Job loss
o    Business investments
o    Rental property investment
o    Home improvements
o    Alternative to high rate loans
o    Debt consolidation
o    Emergency backup fund

New mortgage underwriting guidelines will require federally regulated lenders to limit all new HELOCs to a 65% loan-to-value ratio … down from the current rate of 80 percent.

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If you think a HELOC would be a smart precautionary move, please give Justin a call at  604-736-1855.