When a mortgage is readvanceable, it means you can reborrow the principal that you pay.
A readvanceable mortgage has two or more portions:
- A regular mortgage
- A revolving line of credit (LOC)
The LOC limit increases each time you make a principal payment on the mortgage.
The readvanceable mortgages you get from federally-regulated lenders have three key limitations:
- The maximum #LTV# (a.k.a. "global limit") of a readvanceable mortgage is 80%, including the mortgage and line of credit portions combined
- The maximum LTV of the revolving LOC portion cannot exceed 65% of the home's appraised value. Any borrowing above this must be in a regular amortizing mortgage portion.
- As of November 1, 2023, you cannot readvance any principal paid on borrowing that is more than 65% of your home value. Any such principal payments must be matched by a reduction in the overall authorized limit of that readvanceable mortgage until this limit falls to 65%.
These last two restrictions do not apply to some provincially-regulated lenders.