Whenever I get a call from a Real Estate Agent or client asking me about obtaining mortgage financing for a former grow-op the first thought that comes to my head is, “Why would anyone want to buy a former grow-op?”. This blog post was written not only to explain the process of obtaining a mortgage for a former grow-op, but also to present some opinions on why you shouldn’t.

How will I know the property I’m buying is a former grow-op?

In British Columbia, the property disclosure and/or MLS® listing will indicate the property has been a former grow-op. Not all provinces in Canada require a property disclosure. Use a Real Estate Agent who can research the property and help find out if it was a former grow-op.

Where can I get a mortgage for a former grow-op?

The truth is, not very many places. This is part of the reason I always encourage clients to avoid buying a former grow-op.

Over the past few years the majority of lenders in Canada no longer finance former grow-ops. There’s a good chance that if you walk into your local bank branch they’ll turn you away. There is only a handful of lenders left that will even consider lending on a former grow-op and for the most part are made up of local Credit Unions.

Since there are fewer mortgage financing options for a former grow-op, be prepared to potentially pay higher rates at origination and renewal. Make sure you thoroughly review the terms & conditions of the mortgage and make sure they fit with your current and long-term goals for the property.

While you might be getting a “deal” on the purchase price of a former grow-op, you may find it ends up costing you more in the long run since you are pigeon-holed into one lender.

When will a lender loan on a former grow-op?

Lenders will only provide financing to a former grow-op if it has been fully remediated. In British Columbia whenever a property disclosure and/or MLS® listing indicates that a home has been declared a grow-op, lenders will require a satisfactory Phase 1 Environmental Assessment and a re-issued occupancy permit by the applicable municipality.

If you are thinking of purchasing a former grow-op, the listing Real Estate Agent should have both on hand. Ask to see them. Without both a satisfactory Phase 1 Environmental Assessment and occupancy permit in place you will not get a mortgage.

How does buying a former grow-op affect value?

In this video Calgary Real Estate Agent Kelley Skar explains how purchasing a former grow-op will affect value of your home should you decide to sell. Since former grow-ops were once a hazard to the surrounding area they can contribute to a decline of the market value of the property.

Kelley mentions in the video that the home doesn’t need to be disclosed as a former grow-op. While this is the case in certain provinces in Canada, in British Columbia sellers are required to complete a property disclosure and this information is fully disclosed so all potential buyers will know it is a former grow-op.

Since a former grow-op is stigmatized, you will find less buyers interested in the property in the first place. Something else to consider is that it will be more difficult to find a buyer for your property since many people want to port their mortgage when they are purchasing a new home. There’s a good chance that these potential buyers can’t port their mortgage to a grow-op since their lender won’t finance them.

Should I have other concerns when buying a former grow-op?

Absolutely! Since the property was once used for criminal activity you need to aware that your property may still be viewed as such by other criminals, and you may be more susceptible to home invasions and break & enters.

Still want to buy a former grow-op?

Hopefully you will give it a second thought after reading this blog post, but if you are still wanting to buy a former grow-op, get in touch with me and we can discuss further. I can make sure you are pre-approved at a lender that finances former grow-ops and get you in touch with a Real Estate Agent that has experience with these types of properties.

Update: February 12th, 2013

After publishing this post I was contacted by Patrick Johnstone, an Environmental Geoscientist experienced in managing contaminated sites issues in British Columbia. Patrick is also a New Westminster resident and you can find him on Twitter (@NWimby) and his blog over at NWIMBY (New Westminster In My Back Yard).

His comment offers a far more technical insight into buying a former grow-op so I have posted it below.

The production of illicit drugs (grow-up, meth lab, etc.) is considered a “Schedule 2 Activity” under the BC Contaminated Sites Regulation (“BC-CSR”). This means that any property where these activities took place are subject to a bunch of screening measures that would normally only be applied on commercial or industrial properties where activities “likely to cause contamination” took place. So the house is now in a classification with gas stations, machine shops, coal mines, etc. Illegal grow ops and meth labs are one of the very few “Schedule 2 Activities” that commonly take place on residential-zoned property, and therefore the only time most residential landowners would encounter the BC-CSR.

From a Provincial legislation side, if you go to the City to request a Demolition Permit (or a Rezoning, Subdivision or Development permit) for a property where there has been Schedule 2 Activity, the City is required to get a Site Profile from you outlining the site history, and send that to the Ministry of Environment prior to issuing a permit. The Site Profile must be filled out by someone knowledgeable of the site history, and if the presence of a illicit drug operation was disclosed to you on the Property Disclosure form, you must relay this information forward (or risk defrauding the governmenta bad idea). At the very least, this is a 2-week inconvenience while the Ministry decides your property is no risk and releases the Permit. At the worst, the Ministry may “freeze” the permit, preventing the City from issuing any approvals until the property is cleaned up to the Ministry’s satisfaction.

The Phase 1 Environmental Site Assessment will not likely provide this assurance to the Ministry. The actual report required is a “Stage 1 Preliminary Site Assessment”which is a slightly expanded Phase 1 ESA that has all the bells and whistles required by the Provincial Regulation.

For an urban grow-op scenario, this report will cost anywhere between $1,500 and $3,000 depending on the Environmental Professional you hire and their thoroughness. Even this report is just a table-top survey of the property history with a site visit to assess conditions; it will not test for the presence of contamination.

If that report comes back saying there is no reason to suspect any environmental issues, the homeowner may send that to the Ministry, and they “may” release your permits. If, however, this report suggests that there is evidence or a high probability that polluting substances were spilled in the soil, or a septic field exists where chemicals may have been dumped, or there is any other reason to suspect contamination (e.g., stressed vegetation, oil stains on a gravel patch, etc.), the Ministry would request a “Stage 2 PSI.” This stage involves drilling a couple of small holes in the yard, putting some soil in a bag and groundwater in jars to send off to the lab for analysis. Even if no contamination is found, you are lucky only paying $15,000 or more in investigation costs. If contamination is found (those gangsta guys poured their leftover glycol out the back door instead of depositing it in a regulated landfill!) you will be headed down a real rabbit hole. It can take tens or hundreds of thousands of dollars, and more than year, to complete investigations and perform the cleanup required to get permission from the Ministry to redevelop your land.

The only way to be sure your former-drug-house property is not going to cause you contamination issues down the road is not to have an “Phase 1 ESA” in hand, but a “Determination” letter from the Ministry stating that the site is not contaminated, or a “Certificate of Compliance” from the Ministry stating that the site has been cleaned up to the Ministry’s satisfaction, and no longer is considered contaminated. It is important to note that both of these Ministry documents arrive with a series of “Schedule B Conditions” which must be adhered to for the Determination/Certificate to be valid, and may reduce your enjoyment of your land.

This is just a little peek into the window of the BC Contaminated Sites Regulation. I would not suggest anyone get involved in purchasing a piece of Contaminated Land until they fully understand the CSR, or (much better) get the advice of a Qualified Environmental Professional to advise if/how they will need to interact with the Ministry in order to get their potentially-contaminated land cleaned up, or cleared of the legislative stigma of a “Contaminated Site.”
 

SCOTT DAWSON
REW.CA
http://www.rew.ca/news/think-that-former-grow-op-is-a-deal-think-again-1.2096053 

When purchasing a property, it can be an overwhelming experience. Especially with the current real estate market when you need to make fast decisions and you need to get your questions answered quickly. Many think that their only option is talking to their bank where they do their daily banking to get their mortgage. The question is you’re your ever considered working with a Mortgage Expert? A Mortgage Broker?

There are many reasons why you can benefit from using a Mortgage Expert. A mortgage consumer survey conducted in 2015 by CMHC found in that 55% of first-time buyers reported arranging their mortgage through a mortgage broker.

The survey also reported that overall, recent buyers were satisfied with their experience using a broker (79%) and almost half (47%) “totally agreed” they were satisfied and 32% “somewhat agreed” they were satisfied.

The following are some reasons why you should consider working with a Mortgage Expert:

• Mortgages are our area of expertise

When you need a mortgage or are refinancing your existing one you will have questions such as. Where do I start? Which lender is the best fit for my needs? Which lender can offer me the best value? What are the real differences between mortgages? Which terms and features are the best for my unique needs?

Mortgage Experts have the answers. They work and have experience working with up to 200 plus lenders including big banks, credit unions and other lenders that only work with brokers. They understand the benefits of the various rate options, are familiar with the different types of mortgages and find the best mortgage for your unique needs. In comparison, if you approach your bank for a mortgage, they can only offer you a limited choice of their own products.

• Mortgage Experts find solutions that fit your unique needs

They will help you navigate the confusing and overwhelming road of the different rate types, mortgage options and terms while helping you find the best solution for your current circumstance and your long term plans. Mortgage Experts take the time to understand your financial needs and situation. In addition, to all of this, they help you avoid unnecessary risks and can save you money.

• Help you save time and money

Buying a house is time, energy and emotionally consuming. Finding the right home and finding the best mortgage that is right for you can take hours, days and even weeks if you were to do it yourself. Mortgage Experts do most of the leg work for you. They will research mortgage options, process your application, obtain the required documentation requirements and negotiate on your behalf. This means less disruption to your daily life and more time to focus on your home research and enjoy the process of homeownership.

• Multiple options for every client

Since each bank and lender have their unique guideline and programs. Mortgage Experts are able to assist clients with different situations. They are able to help if you don’t have sufficient funds for the down payment or/and closing costs. If you are self-employed or own your own business making it difficult to verify their income or if you have credit blemishes.

• The services of a Mortgage Expert are free

Yes, Mortgage Experts are paid their fees by the lender, not by the person who is using the mortgage broker’s services. There is no cost for the client.

Before you start shopping for your home, contact a Dominion Lending Centres Mortgage Expert to assist you in your road to homeownership.

ALISA ARAGON
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/aside-banks-options-mortgage/ 

When bad things happen to good people sometimes the reality is they just can’t keep up with their mortgage payments. While Canadian mortgage defaults are amongst the lowest in the world at just 0.31%, foreclosure still happens.

In BC, if a lender forecloses on a homeowner they are required to give the borrower a 6-month Redemption Period – time granted to bring their mortgage up to date or find another lender. If at the end of this period the borrower is unsuccessful the foreclosing lender can ask for a Court-Ordered Sale. Once granted the property will be appraised and then listed by a realtor for sale at a price that will get the bank their money back in a reasonable amount of time. This usually translates into a lower asking price than if the seller that could hold out for the best the market has to offer.

If you have found a property in foreclosure listed at a great price there are a few things to consider before submitting an offer.

First, as soon as an offer is made and accepted a court date is set for about two weeks after. At court other parties can attend and make their offers and it can turn into a bidding war with the Court approving what they feel is the best offer.

Another point to consider is that you have to come to court with basically a condition-free offer. This means if you need financing to buy it you can only have one condition left on the mortgage approval – the Court accepting the offer. If you have less than 20% down and need mortgage insurance (CMHC) some lenders won’t take it to the insurer before your offer is accepted so your options may be limited somewhat. You have a much stronger bid if you have more than 20% to put down.

The rest of the financing conditions are pretty much exactly what to expect but again, all conditions need to be satisfied before presenting an offer. This means the cost of an appraisal and house inspection are upfront costs that may be a waste of money if you don’t get the property in the end.

Once the Court approves your offer the completion date is set usually for two weeks after that so you had also better be prepared for a hasty move if that proves necessary.

The last thing to note is that once the sale completes at lower than true market value you have now effectively established a new value for your place. Over the next 6-months or more likely a year an appraisal on this property will have its own sale price factored into its appraised value so if flipping is your game you could have a longer than normal investment period before seeing it’s true market value reflected.

Buying a foreclosure is a step up in the complexity of buying real estate so always seek the professional advice of a Dominion Lending Centres agent before jumping in.
 

Before we start, something needs to be made clear: B.C.’s First-Time Home Buyers’ Program is not the same thing as First-Time Home Buyers’ Tax Credit and it is also not the same as the Home Buyers Plan. The First-Time Home Buyers’ Program in British Columbia gives individuals the opportunity to reduce or eliminate the property transfer tax they pay when purchasing their first home.

Property transfer tax is exactly as it sounds: a tax you pay to transfer your purchased home into your name. It is a one time tax everyone pays when they buy a home and it is not the same thing as yearly property tax payments. Property transfer tax is equal to 1% of the first $200,000 of a property’s value plus 2% on any amount over $200,000 up to $2,000,000. So, if you buy a house or condo worth $350,000 you will pay $5,000 in property transfer tax (1% of $200,000 plus 2% of $150,000).

In order to qualify for this First-Time Home Buyers’ Program and be exempt from paying your property transfer tax, you must be:

* Canadian citizen or permanent resident

* Lived in B.C. for 12 consecutive months up until you register the property OR filed at least 2 income tax returns as a B.C. resident in the past 6 years.

* Have never owned any portion, of any home or residence, anywhere in the world at any time.

* Have never received a first-time home buyers’ exemption or refund.

If you qualify for the above, then you must make sure the property qualifies for the following:

* Located in B.C.

* Your principal residence (you must live there and not rent it out)

* Have a value of $475,000 or less if register on or after February 19, 2014

* be smaller than 0.5 hectares (53,819.60 sq. ft.)

Any amount over $475,000 just means you will not receive a 100% exemption or refund, and you will still need to pay a portion of the tax. To find out what that portion would be, you can visit: http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand/first-time-home-buyers/current-amount#current-exempt or call the mortgage professionals at Dominion Lending Centre – we’re here to help!

RYAN OAKE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/b-c-s-first-time-home-buyers-program/ 

Mortgages are like vehicles. A bank is similar to the brand, Ford or Toyota for example. How long you have a mortgage before it’s time to renew is like the model, a Fusion or Camry. The rate is similar to the car’s paint color, and the mortgage benefits such as prepayment privileges and portability are like the car’s benefits; 4-wheel drive, hatchback, four doors instead of two, etc.

A bank is like a sales person at a Ford or Toyota dealership. He or she know everything about every car on their lot; engine size, warranty, all available colors, and their fuel ratings. He or she can match any car to your needs and lifestyle, as long as it’s sold at their lot.

But what if they don’t have the most fuel efficient car? What if you don’t like the design or you need four doors and a trunk and all they have is two doors and a hatchback? Are you still going to buy from that dealership just because you went there first? No, you’re going down the street to check out the Chevrolet, maybe even BMW, Mazda, or the new Chrysler dealership. That sales person doesn’t want you to go buy from another lot down the street, but you are buying to satisfy your needs, not the dealership’s needs of selling their own cars.

Now imagine a dealership that sold every single make and model of vehicle. Imagine you could choose one of their sales people, and have them work only for you. They know just as much or even more about every make and model, they do all the research for you and tell you what you need to look for, they ask you the important questions; they have your best interest. That is a mortgage broker, your own personal expert.

Now, you may not need a personal expert to buy a car. But what about mortgages? Is a 0.10% lower interest rate a lot? Or will a 20% prepayment privilege instead of 10% be more advantageous? Can you switch lenders and move your mortgage? $15,000 or $5,000 penalty? How is it calculated? Fixed or variable? Is a collateral charge good or bad? 2-year term or 5-year? Big bank or monoline lender? How about credit unions? The list goes on.

So, a bank or Dominion Lending Centres mortgage broker? Put it this way; would you buy from the first dealership you visit or hire an expert?

RYAN OAKE
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/bank-mortgage-broker/ 

Practice your mortgage…

What exactly do I mean by that? Well, if you’re a first-time buyer and just beginning to explore the housing market, chances are you’re currently renting or living with family, and very likely paying less than you will be going into your new home. For this reason, I strongly suggest you start getting used to your new mortgage payments sooner than later.

Let’s suppose you’re paying $1,600.00 monthly rent and planning on buying a home for $500,000.00 with a 10% down payment plus typical maintenance fees and taxes your new monthly payment would be approx. $2,600.00. I’d encourage you to start paying yourself the difference between your current rent and your new monthly payment, then deposit that $1,000.00 into an on-line savings account.

Why? For starters you’ll get used to the amount that will eventually be your real housing payment. If that isn’t compelling enough in itself, consider that you’re also be putting away extra money to help with your new purchase down payment, pay your closing costs or treat yourself to something special.

The Sooner you start “practicing your mortgage”, the better…

Already a home owner and looking to buy up? The same principle applies. Once you’ve determined the monthly mortgage payment on your new home, increase your existing mortgage payment by that amount. You’ll be better prepared for the realty of your new payment and paying down your mortgage faster in the meantime.

Any of the 2,500 Dominion Lending Centres mortgage professionals across Canada are happy to help you work through these and other mortgage related scenarios and tips, so please get in touch.

SHAUN ZIPURSKY
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/practice-new-mortgage/ 

I recently met a couple that took out a reverse mortgage to purchase a house in Hamilton, ON. Their daughter was attending McMaster University, and was just starting her post-graduate degree.

After spending close to $25,000 over 4-years in rent, her parents decided to get into the landlord business!

Here’s how the numbers worked out:

• Clients 58 & 60 years old
• $3M home in Oakville, ON
• Approved for $600K reverse mortgage
• McMaster Rental Property – $2375 monthly rental income (daughter lives rent free), or $28,500 rental income per year
• CHIP Reverse Mortgage Interest – $28,500 (4.75%)

Now at first glance, it looks like these freshman landlords will simply break-even as interest expense is equal to rental income.

But there are a few considerations:

• Daughter is living rent-free – parents are saving $5700/year in rent
• CHIP Reverse Mortgage Interest is tax deductible against total taxable income
• $3M Oakville home – if it increases in value long-term, by only 1% per annum, this will cover the interest expense & more
• The flexibility of deciding how much or how little interest payments to make on their reverse mortgage puts these clients in an enviable cash-flow position.

House rentals are not for everyone as they tend to be a “hands on” investment. But for the right client, rental properties can be a lucrative opportunity as part of a diversified investment portfolio.

To learn more about how this CHIP Reverse Mortgage can work for you, contact the mortgage professionals at Dominion Lending Centres.
 

Every mortgage secured by a property will be registered with the land title office.There are two ways your mortgage can be registered on title: Standard charge or collateral charge.  Not long ago, most lenders registered all mortgages as a standard charge.  In recent years, some lenders – mainly the major big banks – have moved towards using the collateral charge.

When choosing your mortgage it is vital you fully understand the terms you are agreeing to. Choosing the right mortgage can protect your interest now and in the future.  Let’s focus on the major differences between the two charges/liens that your mortgage can be registered as.

STANDARD CHARGE MORTGAGE

A standard charge mortgage is registered for the amount of your mortgage only.  A standard charge mortgage allows you the freedom to freely move lenders at renewal time without incurring legal fees.  As a borrower, you want to be in a standard charge mortgage because it gives you the leverage to shop options at renewal.

A standard charge mortgage allows you to borrow more in the form of a second mortgage or a home equity line of credit (HELOC).  As you pay down your mortgage you can access the equity you’ve gained.

COLLATERAL CHARGE MORTGAGE

A collateral charge mortgage is registered on title for more money than you require to close.  For example, a $500,000 mortgage might be registered on title as a $600,000 charge.  The lender will tell you this is beneficial because it makes it easier to access the home equity without incurring legal fees.

The major downside of a collateral mortgage becomes evident at your maturity date.  If you want to change lenders in order to obtain a better product or rate, you are on the hook for legal fees.  This often deters borrowers from moving lenders and they can feel “forced” to take whatever renewal rate their current lender is offering.

With a standard charge mortgage, in most cases, the new lender will cover the charges under a straight switch(no new money) in order to earn your business.  This means no fees to you and the ability to shop for the best mortgage.

Navigating through the mortgage process alone can be tricky.  Dominion Lending Centres has access to multiple lenders and we can help ensure you receive the perfect mortgage.

BRENT SHEPHEARD
Dominion Lending Centres – Accredited Mortgage Professional
https://dominionlending.ca/news/8-things-avoid-buying-home/