Landing condos . Home mortgage credit loans are very popular. The Bank of Canada is widely expected to announce on Wednesday that it will raise its benchmark bank interest rate from 0.5% to 0.75%.Please Visit: Landing condos to Get Your VVIP Registration Today!
Relevant people pointed out that the increase in interest rates not only exerts financial pressure on holders of housing loans, but also affects all aspects, especially those who use home equity as collateral to lend credit lines, but also have to make plans in advance.
In recent years, with the marked rise in house prices, a new product launched by banks and lending institutions, “(home equity lines of credit,HELOCs with home equity as collateral”, has become popular.
Financial institutions will grant borrowers loans of varying amounts based on the net market value of the houses mortgaged by borrowers, often at an interest rate of 0.5 to 2 percentage points above the bank’s prime rate.
The interest rate of home mortgage credit loan is higher than that of ordinary home loan, but it is still popular among the public, because on the face of it, with the rising house prices, the mortgaged property can “exchange” a large amount of “cash” for the homeowner. and after using this kind of loan, as long as the interest is paid to the bank on schedule, the bank does not require a time limit to repay the principal. Without having to sell and move, homeowners can enjoy the “dividend” of rising house prices in advance, often in no hurry to repay the principal, but expect the loan to be repaid in a lump sum when they sell the house in the future.
Because of the above convenience, the share of home mortgage credit in the Canadian loan market is getting heavier and heavier. Canadian financial institutions are currently lending about 3 million home mortgages, with an average of 70, 000 yuan each, or a total of 211 billion yuan, according to figures released last month by the Financial consumption Board of Canada ((Financial Consumer Agency of Canada,FCAC). The FCAC survey even shows that 40% of the households with such loans fail to repay their principal on a regular basis. There is no change in how much we borrowed three or four years ago, but how much we still owe today. For many families, once the loan line is approved by the bank, it is like turning their house into an ATM, causing debt to accumulate more and more, but this kind of loan has a major hidden worry to the family’s financial stability. one is that such loans use floating interest rates, that is, raising the benchmark interest rate by several percentage points, which means that the burden on borrowers will continue to increase if the interest rate continues to rise.
Another thing to note is that this type of credit line loan is called “demand loans”, which generally means “loan that can be repaid at any time”. This is completely different from the mortgage, as long as the borrower pays off the monthly payment on time, will not be forced to pay off the principal at one time. However, for this type of credit line loan, the borrower can call the borrower at any time to ask for the loan to be repaid at any time as long as the borrower deems it necessary.
Financial and financial experts interviewed by CBC pointed out that house prices are still rising, although the range is unstable, banks are unlikely to ask borrowers to repay money at once, but the risk of this huge national debt of 211 billion yuan is more significant than mortgage loans, because ordinary people will do their best to repay mortgage loans and avoid defaulting on banks, but the public may not make the same efforts for such mortgage loans.
Experts also pointed out that some people said that the use of mortgage loans is used to decorate existing houses, thus making the “loan” a recoverable and rewarding “investment” in the future. This kind of thinking is also problematic, because housing does not always appreciate in value. Once the market conditions change, there is no guarantee that the investment in housing will be rewarded by the future market. Whether it is decorating the house or using this kind of loan to travel, there is not much difference in nature. People who use a lot of home mortgages and put aside their debts for years should think twice.