An advanceable mortgage combines a traditional mortgage with a line of credit that acts like a HELOC. Together they can reach up to 80% of the home's value at the time the loan was approved, which is referred to as the global limit. As you make payments toward your mortgage, the credit limit on the line of credit historically increased by an amount equal to the principal you paid down, allowing you to re-borrow that equity.
OSFI introduced a rule that requires any lending above 65% of the property value at the time the loan was approved to be both amortizing and non-advanceable. For Canada's Big Six banks, this takes effect on November 1, 2023. Principal payments applied to the portion above 65% must now be matched by a reduction in the overall authorized global limit until it shrinks to 65%.
If your product was set up before September 15, 2012, it is grandfathered and these changes do not apply. For newer products, your global limit will gradually reduce from 80% toward 65% over time through monthly reductions. The exact monthly reduction amount differs from one client to another and from one bank to another, but the end result is the same: your ability to recycle equity within that 80% box will shrink.
No. The monthly reduction amount is not an extra payment you must make out of pocket. As you pay down your mortgage principal, the portion that used to advance over to your line of credit will instead go toward shrinking your overall global limit from 80% down to 65% over the life of the loan.
If you have received a letter from your bank and want to explore new options to continue accessing capital, you should reach out to a mortgage professional to discuss alternative financing strategies that work within the new regulatory framework.
