Lending Regulations and How they Affect You
The U.S. crisis of last decade brought about sweeping changes to the lending landscape, and forever changed the way that the lending of money was carried out. Over-zealous banking and large lines of credit lead to debt crisis that hurt our economy dearly. Since then, regulations have changed, and become more complex, regulated, and monitored. So knowing what kind of loan, or what amount you can get can be pretty difficult. Here’s an outline of some new lending regulations and how they affect you, the consumer.
First, why did they make changes?
Good question. The crisis of 2008 was a result of over-lending, and a lack of oversight from the banks on who they were lending money out to. Simply put, borrowers over-borrowed, and lenders over-lent with little care for how the money was going to be paid back. The Canadian government had the foresight to not make the same mistakes as in the U.S. Therefore, the new regulations make it much more difficult to do this.
What are the new regulations?
The Canadian government’s new regulations have increased the down payments that must be made before you can qualify for a loan, and also decreased the amortization period (the length of the loan). Also, when it comes to home equity loans, there are new limits as to how much can be borrowed. All in all, the regulations were put in place to tighten the lending industry and stabilize the economy.
How do they affect me?
In short, the new regulations mean it is more difficult for you to obtain a loan. You first need to prove that you have the financial means to pay back the loan. From there, the new regulation on home equity loans is that you can only borrow up to 65% of your home’s appraised value on the real estate market.
As far as personal loans such as payday loans, the government of Canada passed new regulation to make it a criminal offence for any lender to enter into a contract at an interest rate deemed too high. This provides you more protection from unscrupulous lenders in the industry.
The overall goal of the legislation has been to limit the lending industry, and avoid a crisis the magnitude of which we saw in the mid 00’s in the U.S. Generally, these new regulations have succeeded in protecting everyone, both consumers and lenders, from potentially disastrous consequences. The new regulations make it more difficult to get home equity loans, have increased down payments, protected consumers from usury, and decreased the length of mortgages, among other things.
At 8ight, we are here to help. Contact us today for more information on getting your first loan.
When is the Best Time for a Second Mortgage?
Owning a property is usually the single most important investment in a person’s life, and certainly one of the largest. Purchasing a home is not only a major life event – it’s also one of your best opportunities to gain equity in something tangible. When the thought of taking a second mortgage comes up it can seem daunting. The truth is that a second mortgage is a great idea under the right circumstances, and if you know when to take one out, you can gain an advantage when it comes to your finances. Here are some tips about taking a second mortgage.
Are you at risk of penalties on your first mortgage?
If you are behind on your payments for your first mortgage or at risk of incurring penalties, then you might want to consider taking a second one out. We all fall on hard times, and financial difficulties right now don’t always mean they will persist into the future. If you have equity built up in your home, then you can use it to help avoid getting penalized and give yourself some breathing room.
Is the housing market on the upswing?
The amount of a second mortgage is linked to the value of your home. If the price tag has gone up because of the housing market, then now is the time to strike while the iron is hot. While it isn’t the only good time to get one, it might be the best option. A high home value will increase the amount that you can get and will give you more flexibility.
Do you have a good use for the money?
Extra money is always welcome, but taking a second loan on your home makes the most sense when you have a real use for it. The best situations are when you have a chance to use that money to invest in something valuable for your future. If you need to push your business forward and have a great opportunity to do so immediately, pay for your child’s education, or want to consolidate debt to avoid high interest rates and have one lower monthly payment, then a second mortgage could be your best solution. Each decision you make should have real financial goals in mind.
Decisions regarding large sums of money are never easy, especially when it comes to your home. Even though using the equity you have built up in it is enticing, you need to think it through. If you are asking yourself about a second mortgage, then you need a common sense financial corporation to help you achieve your financial goals. Contact us today to find out more about second mortgage.
8ight Financial Corp has helped thousands of Canadians achieve their financial goals by lending with a “common sense” approach. The benefits and uses of a second mortgage are immense, and when utilized properly, they can help you achieve many of your life goals.
8ight Financial Corp. 