More mortgage changes are commented on, particularly, those for self employed people:

Transcript of Video Blog:

Hi everybody, Rowan Smith at the Mortgage Centre. So once again, there’s been another rule change that’s come down and this one deals specifically with self-employed people.

I have heard statistics, and I have nothing to back this up, but I have heard statistics that over 60 percent of the people in BC are self-employed or have some self-employment income. So, if that’s the case, this rule is going to effect a lot of people.

Previously, if you had a very good credit rating, and I mean pristine. You were able to put five percent down and if you were self-employed, you could state your income. You did not have to document it. You did have to document that it was reasonable, that that number was not just something that you fictitiously pulled out of the air; because that would be mortgage fraud.

You had to document simply that you had a business for the last couple of years, or that you’ve been in the field for a couple of years. You can’t do five percent down under that program any more. The fact is on April 19th, you are only going to be able to do 90 percent financing. You will require 10 percent down as a self-employed person, if you can’t document your income under traditional rules.

Now how many of these deals are out there and how many people are affected by this? Generally, self-employed people, I would say, they’re usually putting down 10 percent or more down. I did not get a lot of five percent down self-employed stated income programs.

I have seen, I can count on my hands in the last 40 years, so I don’t think that this change is necessarily going to affect a lot of people in the market as a whole, but it will bring some stability back again. This is the whole purpose of the government’s changes, is to prevent speculation and there has been a lot of it in the last while and some of these stated income programs have certainly been taken advantage of by some banks, lenders, and brokers.

So, if you have any questions about stated income, or if you’re self-employed and you’re thinking of buying a place and you’re not sure if you qualify under the new guidelines, please give me a call. It’s Rowan Smith from the Mortgage Centre.

Hi everybody. It’s Rowan Smith with the Mortgage Centre. The last couple weeks we’ve seen a lot of announcements about mortgage changes, rules changes, and how people are going to be qualifying for mortgages going forward, especially the variable rate. And that’s one of the biggest changes and it’s something I wanted to cover today and talk about was how are variable rate mortgages going to be affected? How are people’s ability to qualify going to be affected under the new rules?

Transcript of Video Blog:

So the government has officially announced now that the rate they’ll be using to qualify people for a variable rate mortgage is going to be the five year posted rate. Presently, that’s 5.39%. Compare that to currently, with a lot of the non bank institutions and the non traditional institutions.

One of their biggest abilities to gain market share has been that they qualify people for the variable based on many times ahe three year discounted rate or a five year discounted rate. There’s various policies all over the place that vary from lender to lender to lender. Now we as brokers took advantage of that by finding the best rules that fit our client and so getting the most amount of mortgage that we could.

Now going forward, that won’t be the case any longer. The government has officially leveled the playing field. So anybody offering a variable rate mortgage will have to have to qualify at the new five year posted rate. Well, not the new posted rate, but the existing posted rate.

So let’s see what kind of difference that will have. If previously under the old guidelines, if you made $60,000 a year and just assuming that the average taxes and fees and stuff, and assuming no other debts, you’re able to qualify for $460,000 of mortgage for a variable. Under the new guidelines, that’s reduced to $364,000 that you are able to qualify for.

That’s a reduction of 20%, almost 21%, that you’re no longer able to afford. So if you’re looking for a property that is worth $800,000 in today’s market under today’s rules fast forward six months and the number of people who qualify for that is going to be dramatically reduced.

Everybody is going to be qualifying for 20% less than they do today. Now this may bring us long term stability to market, but I am going to bet that there’s going to be some growing pains from the transition of the old rules to the new.

Now when is that going to take effect? Well, April 19th is the date that this “law” as it were, however, some other institutions may move to this sooner, often they do. That’s the deadline when everybody has to be on board with this system. A lot of institutions already use this rule. Some of the big banks, the HSBC and whatnot, they already qualify you based on a posted rate.

Now they already use a three year posted rate, in many cases, and there is a big difference between a three and a five year. The whole purpose of this is to determine what can somebody afford now, and what can they afford if rates should rise. It builds in a safety net, it builds in a budget builds into the budget that rates may increase and that payments may increase and this may be better for us in the long term.

In the short term though, if you are trying to stretch to get the maximum amount of mortgage that you can, perhaps because the bank doesn’t accept your income, or you’re on a relatively new job, or there’s mat leave, or something like that coming up, you need to get on this now to qualify and purchase now. For the Mortgage Centre, I’m Rowan Smith.

I get frequent questions from clients that say, “my lender is who?” and it is usually because they aren’t familiar with a broker-only lender and there are a LOT of broker only lenders. This video blog explains why we use them instead of the big banks 100% of the time.

Transcript of Video Blog:

Hi, everybody. It’s Rowan Smith from the Mortgage Centre. I want to address a couple of questions that I’ve received on some of the lenders and how we brokers make our decisions as to which lender we’re going to send you with.

By and large, we brokers are paid approximately the same at most lenders, if we’re offering the competitive market rates. We generally have a list of maybe four or five, kind of our top five, and those top five vary from broker to broker.

It’s one of the reasons that we get differentiated, is our service level. We typically like to use institutions who have a very fast turnaround, who will get back to us quickly, who will answer their phone and who will accept more common practices in the industry.

A couple of questions people brought up were — I’m going to grab a couple of different lenders that we use — who is McCory Financial, or who is FirstLine Mortgages? Because these two institutions play a pretty big role in the market right now, and a lot of people don’t know who they are.

Many of my clients have been placed with them. I, myself, have two mortgages with FirstLine Mortgages, and I have no problem placing clients with them. So, who are they? FirstLine is a division of CIBC. They’re a subsidiary of CIBC, one of the big banks in the country, and they’re just a different channel.

Certain banks have made a decision to try to get business from the branch network, to try to get business from brokers. Because we’re one arm of business, they don’t have to pay us a salary. We’re paid a one-time commission, so there’s only a cost if we do a deal with them. And for that rate, they can offer very, very low rates.

Some of these non-retail lenders, like FirstLine, are very efficient at what they do. The only thing they do are mortgages. They don’t want your direct deposit for your payroll, any of that other stuff. They just want the mortgage. That gives them a lot of efficiencies that perhaps some of the other big banks don’t have.

So, who are all these banks? Because you’ll see on my web page and a lot of my advertisements, it’s 40-plus lenders. If I challenged every one of you to name as many banks and credit unions as you could, I’d be impressed if you could come up with six or seven. We have many, many lenders.

An example — ING Direct. People often say to me, when I place them with McCory or I place them with FirstLine or something like that, is it really secure being with them? A lot of people invest with ING Direct, who does not have retail branch locations, or they have maybe one in two or three major cities in the entire country.

I’d be much more leery of where I was putting my cash-invested dollars, rather than where I’m borrowing from. Should one of those lenders go under, at the end of the day, there’s going to be another lender behind them that will take over the mortgage. You’ll continue to make your payments. And the transition, while perhaps not seamless, will nonetheless not make you be foreclosed on, or lose your home or any of the doom and gloom that some people are predicting.

If we give you a great rate, and you ask us who the lender is, and it’s someone you haven’t heard of, that may be because it’s a promotional rate and the lender’s trying to gain market share. Also, very likely, they’re probably owned behind the scenes by one of the big financial banks, anyway.

So, if you, or someone you know, is getting put with a lender that they’re not familiar with, and maybe you’d like some information on what that lender is, who they are, how long they’ve been around in the market, give me a call. It’s Rowan Smith at The Mortgage Centre.

My most popular prior post BY FAR was dealing with form MGO or Marijuana Grow Ops. There is a lot of possible profit and potential gain for those that can afford to buy, fix, and flip them, IF you know the required steps.

This video addresses what you need to do in ANY part of the country if you want bank financing to finance a past grow op. If you want private financing, these rules don’t apply, but most people would rather pay 3.5% over 10% privately. This video blog shows you what is needed. Enjoy!

Transcript of Video Blog:

Hi, everybody, Rowan Smith with the Mortgage Centre. My most commonly hit blog topic of all time, consistently, is talking about former marijuana grow operations. So I’m going to do another one that’s going to cover a little bit more detail.

For those of you that are not in the Vancouver market, perhaps you’re in the Toronto or Ontario market where they’re not used to dealing with these things, this can serve as a guide for how best to proceed to get the best financing rates for you and your clients.

So, a former marijuana grow operation. It doesn’t just have to have been currently a grow off of the prior owner; it could have been the owner before then or the owner before that. When you buy a property, if you’re using a realtor, there’s usually a disclosure statement or something where they ask, “Has the property ever been used as a former marijuana grow op?”

If it has, and it’s in B.C. anyway, that person has to declare that it has been used as such. And why? Because a lot of times that could compromise the value of the security, which is the home, for the bank.

A lot of banks, Scotia Bank for example, simply will not do a former marijuana grow op. It doesn’t matter if you have 50 percent or 65 percent down. They’re not interested in that business, they’ll get it elsewhere, and they’ll leave it for somebody else.

The more common credit unions are the ones that are doing them. There are a couple of the big banks that will, but they require different things such as environmentals. So if you’re looking to finance a former marijuana grow, here are the things you’re going to have to understand.

You will be required to get an appraisal of that property, guaranteed. Every bank’s going to ask for it. Number two, you’re going to have to provide some sort of environmental study confirming that the property is still fit for human habitation. Now, what that means is there are two types.

There are many types of environmentals, but the most common are a phase one, or it’s the level one, and that’s an air quality test. What they are looking for is mold. Make sure there’s no toxic mold in the property, because people can bleach walls and paint them white and Killz and other stuff to get rid and hide the fact that there was a grow up on the property.

So what they do is they take an air test where the grow op was in the house, they take an air test where they grow op was not in the house, and they do another test outside as a control. They look and make sure that there’s not a massive variance between levels of mold within the property and if it’s within the tolerable limits.

The second thing is some banks are going to want a phase two, where they actually take drywall samples and samples of materials to make sure that not only is the air clean, but there isn’t chemical leeching or other possible environmental problems. Banks have to keep an eye on the fact that the property that they’re financing could represent a future environmental liability to you, the buyer…

We get many questions from clients who think that we don’t order appraisals until everything else in financing is done and that the appraisals is just to “finalize some numbers,” and nothing could be further from the truth. The appraisal is the cornerstone to the entire mortgage deal. If the bank is lending YOU money, they are doing so on the basis of your financial strength, and that of the collateral (the home).

The appraisal is a fundamental part of the purchase process, and takes 2-3 days to do (unless rural takes 5-10 days) and costs around $265 (unless rural is around $500-$750 depending on how remote).

Your broker will (should) know the time on ordering an appraisal, and will order it when he or she thinks appropriate. Certain purchases require an appraisal 100% of the time (former grow ops, stated income, equity deals) and some don’t. You need to trust your broker on when to order it, who to order it from (not all lenders accept all appraisers – usually they have an “approved list”), and what a reasonable price is.

Lastly, the appraisal is $265 – $500 on a purchase that is going to cost several hundred thousand dollars. It’s the “cost of doing business” and you shouldn’t begrudge your bank (or any lender) for requiring it, as it confirms the value of their security (the house you are buying).

Transcript of Video Blog:

Hey, everybody, Rowan Smith from the Mortgage Centre.

I wanted to cover a topic today, which is appraisals and what part in the process they hold. When you’re going to require them, and when you’re not going to require them for financing. Oddly enough, the more you put down, the greater chance you’re going to need an appraisal.

Whenever you buy something that’s CMHC-insured [Canada Mortgage and Housing Corporation], for example, five or 10 percent down, your appraisal is done electronically by the lender, by CMHC, who has an internal valuation model that they use. They’ll look at that model, determine whether the price you’re paying is fair based on comparable sales.

Actually, it’s often an automated process, unless you’re on the high end of the property values, in which case, it may have a person actually involved. If you do have a person involved in the process, they may insist on an appraisal anyway.

The standard rule is up to 20 percent down, you’re probably not going to need an appraisal. Now if you have more than 20 percent down, you will. That’s totally counterintuitive because you’re putting more money down.

Why do they need an appraisal if you’re putting more cash down? The answer is that when you’re not putting 20 percent down, CMHC is insuring that loan so the bank isn’t taking the risk. CMHC is the one taking the true risk that they’re going to lose money in the file.

If you put more than 20 percent down, then the bank is taking the full amount of the risk. In those circumstances, they’re going to insist on an appraisal for sure.

So does that ever stop? Well, with some banks, no; it’s always an appraisal. In a lot of cases, if you’re going to put 50 percent or more down on a property, then you may not need an appraisal. You may just be able to use the tax assessments or a desktop appraisal, which is just something that an appraiser does based on historical sales.

In the event that you’re looking at buying a property, and a broker is telling you that you need an appraisal, you have to realize this is an integral part of the process. Your home, your property, is the security for that mortgage. So to think that they’re going to take your word at the value or they’re going to look at other homes that are for sale, that’s not the lender’s job. That’s the appraiser’s job.

You can guarantee that there’s going to be some form of appraisal or value estimation on every single deal that you do. So if you or somebody you know is being asked to get an appraisal by their lender, this is standard procedure.

For the Mortgage Centre, I’m Rowan Smith.

So did you take a 5.69% mortgage two years ago and are now kicking yourself? A lot of us did. However, we can’t kick ourselves. You make the best decision you can with the information available to you at that point in time.

This video blog talks about imperfect information, and dealing with the “what if” of mortgage planning.

Transcription of Video Blog:

Hi everybody. I want to talk today about something that’s come up several times. I alluded to it recently in a blog post, but I want to talk about making decisions on imperfect information.

At any point in time when we’re, as brokers, selling you an interest rate. We do so with the same economic news that everybody else has, the same economic fundamentals. Things change. Prior to September 11th, none of us knew what was going to happen. We didn’t know the economy was going to go into an immediate dive, thereafter None of us knew that Lehman Brothers were going to go down.

In hindsight, looking at the financial practices of some of those financial institutions that went down in the United States, maybe some of us should have seen it coming, but we didn’t. When I say “we, ” I mean the overall financial institutions sector, the financial sector, and particularly the mortgage lending sector.

Now, why am I bringing this all up? Well I, myself, got into a rate that was well over 5% a few years ago. At the time, it was a fantastic rate. It was a promotion. I had to quick close in a very short period of time to get it.

The reality was when I got it, it was the best deal in town. It couldn’t be matched anywhere. I got it for as many clients as I possibly could. Those same clients, a few years later, are now looking, going “That 5.25 rate, which while fantastic at the time, is looking God-awful right now.”

There’s very little you can do about that. You can absorb the penalty and refinance down, presuming you have the equity or the ability to pay the penalty off in cash. Maybe you can get a bit of a cash-back offer from the new lender. You probably have to pay a slightly higher rate to do it, though. It may make it not worthwhile.

When you’re looking at yourself, if you are kicking yourself, thinking “Wow, I took a product. I took a variable rate when variable rates were prime plus a half. Now they are prime minus a quarter, ” or “I took a five-year when they were 5.50, and now they are 3.79.” If you are in that situation, do not be beating yourself up about it. You made the best decision you could at the time. If it was a good deal when you got it, it’s still a good deal today.

Frankly, any time I see interest rates below 5% to borrow money, that’s pretty darn good in my books. You think back even just eight years ago, ten years ago, at what interest rates people were paying, happily, compared to what they are paying now and you’d be shocked.

You may say, “It’s a totally different market. This is an entirely new paradigm in lending. What applied before no longer applies.”

I would argue that the lending practices that have stood the test of time and the interest rate averages that we all have seen are very accurate. The fact that we are well below those average should suggest there isn’t a lot of downward room but that there should be some upward motion.

When? That’s the question that’s worth a billion dollars. I can’t answer it but I can guide you with some of the recent economic news. If you would like further information or you would like to write a comment, please do so. Otherwise, I’m Rowan Smith for the Mortgage Centre.

Do mortgages exist that have no penalty but a guaranteed rate. The short answer is yes, but the reality is that they are not a product you want.

This video blog goes into this type of mortgage and answers the question for Canadians: “Can you have your cake and eat it too in the mortgage world?”

Enjoy!

Transcript of Video Blog:

So you’re wondering, can you have your cake and eat it, too? Can you have a fixed rate mortgage that has no penalty to pay it out? The answer, in Canada, not if you are going to be getting fully-discounted rates.

Some institutions do offer one-year or six-month fixed rates, but they are rates in the 6.45% and 6.55% range, and they are generally not something anybody opts for. The product does exist, but in Canada you really don’t get to take advantage of it.

Down with our neighbors to the south, the Americans are quite used to taking the long-term mortgages, 30-year amortizations and 30-year terms and having no penalties to get out of their mortgage. They can break it at any time they want.

This is a substantial advantage they enjoy, that their banking system allows. Now having said that, many Americans actually end up paying a fee just to set up a standard mortgage. While we in Canada, generally, don’t have to pay a fee unless there are some quirks or other things to do with your mortgage that don’t fit the bank “box.”

I, as a broker, don’t charge any lender fees, any lender or broker fees. I, as a mortgage broker, do not charge any broker fees on a standard residential bank mortgage.

There are times when we do have to charge fees, and a lot of it has to do with foreclosure bailouts and bankruptcies and whatnot like that, but that is not for the standard mortgage you are getting renewal or purchase or whatnot, and you qualify for it.

If you’re looking at those rate sheets and you’re wondering “Wow, the variable rate is great but I’ve still got to pay a penalty. I would really like a fixed rate, but I don’t want to be stuck for five years.” Unfortunately, you can’t have your cake and eat it too in this industry. I’m sorry. For the Mortgage Centre, I’m Rowan Smith.

All I read is that the market is awesome, everything is awesome, prices are up and going higher, and home ownership is perfect for everyone.

Frankly, I’m tired of this rhetoric. If you are reading some news, such as a developer telling you they are projecting a 5% – 7% increase in prices, ask yourself, WHAT ELSE COULD THEY SAY? If they said they expected a decrease of 5%, you wouldn’t buy their product!

Look to neutral third parties for this type of info. On this topic, and in more detail, watch the blog below.

Transcription of Video Blog:

Hey everybody, Rowan Smith at the Mortgage Centre. I want to talk today about some of the overwhelmingly exuberant good news that keeps coming out in the media right now. A lot of it, I encourage you to view the source of who is issuing this news, before you really put a lot of stock in it.

I recently read an article from the Rennie Marketing group talking about some of their projects that they had on the go, and how they were ecstatic there was going to be a five to seven percent increase in real estate prices in Vancouver.

I look at that and I say, “What else could that organization say? What else could somebody in that situation say, when it’s their financial livelihood?” Now I have a vested interest in the real estate market, but I also have a fiduciary duty to my clients. If I see them getting into something I think is a bad financial move, I have to tell them.

Now that’s very different from a developer whose financial interest that they’re protecting is their own. When a developer issues a statement saying, “Oh, I’m so glad the market is recovered, ” and “Wow! Things have really taken off, ” and they turn and point to stats that have been issued by the mass media in the last couple of months, chances are that trend has already run it’s course.

It’s time and time again that I see great, great news come out, and immediately we seem to suffer a pullback. Now back in 2007, there was a lot of exuberance. People were writing offers, multiple offers, asking me, “Could we go in with no subject to financing?” Generally, the answer is “No,” by the way.

They were going in against 16 other offers, to try to get in on that property and not getting it. Even though they were going 20 percent over asking price and this kind of thing. That kind of behavior is back again, and with it comes the irrational exuberance of the banks who are now suddenly going, “Well, the market’s clearly recovered. Now is the time to get in.”

The chances are, the time to “get into the market” should have been back in January of 2008. When everybody was screaming and crying about real estate being a terrible investment.

Of course, this is 20/20 hindsight that I’m using right now. I, myself, purchased something at that point in time and I think that anybody that did, has reaped a lot of rewards as a result.

I think the old saying goes “when there’s blood in the streets, buy real estate, ” and that is never more true. Right now in the Vancouver real estate market, there is no blood in the streets. If anything, there’s a lot of wolves. I’m Rowan Smith for the Mortgage Centre.

Today was another big day in the mortgage business. The finance minister announced some large changes to mortgages in Canada.

A quick summary of those changes is as follows:

1. Non-owner-occupied properties must have a 20% down payment
2. Maximum financing on a refinance is 90% (instead of 95%)
3. Variable rate mortgage qualifications have been standadrized (sort of)

The video blog below explains these changes, and also gives my commentary on the changes. Enjoy!

Transcription of the Video Blog:

Rowan Smith: Hi, everybody. It’s Rowan Smith from the Mortgage Centre.

As many of you are aware, today on February 16, the government made some announcements as to some changes that they are going to be enacting on mortgage lending in Canada.

These changes were largely the result of the banks going to Ottawa hat in hand and pleading that there was some requirement for some changes. The mortgage industry was getting ahead of itself. Many people were citing there was a bubble and that kind of thing.

I’ve always found this mentality of the banks claiming that the government has to rein in their private lending practices to be a strange one at best. That’s very akin to a car dealership going to the government to say, “We need you to enact laws that make our cars less fast because the clients just like them too much, and they’re buying them all up. We have to provide them. We have to do whatever they want.”

I’ve always thought that was a very strange argument. It just plays out doubly strange here with the banks, who could choose if they wanted to simply to not offer the products that they feel are risky. But they know they’ll lose market share, and so rather than do the right thing, they have the government go and legislate laws instead.

So what were the changes? Well, the first thing is they have enacted some sort of policy regarding the qualification for variable mortgages.

There’s a big discrepancy right now between the rates you pay in a variable mortgage — as low as 1.9% — and rates that you’re paying on fixed mortgages, which if you’re taking a similar five-year term you’re going to be paying around 3.69% or somewhere in that range.

If you’re looking at those two different rates, that’s almost a two percent full difference based on exactly the same amount of debt. So how do you as a borrower justify taking such a substantially higher fixed rate? A lot of people haven’t been; they’ve been opting for the variable.

The problem is a lot of them need that variable rate in order to qualify, and that is a problem, because that is going to be testing affordability shortly. If rates rise, those same people could be in a lot of trouble.

The government has said that from now on, you have to qualify using the five-year fixed rate. What they haven’t said is what five-year fixed rate they’re going to be using. It could be posted rates. It could be the five-year discounted rate. It could be some government-mandated five-year rate.

Let’s not forget: discounted and posted rates are both something that are set by the banks. So if they don’t use a government-mandated rate, that means the banks are still free to adjust posted rates and manipulate how people qualify for variable-rate mortgages.

I’m not too sure how that one’s going to play out yet. We need a little more clarification.

The second thing they’ve done is restrict refinances from 95% loan to value. So you can no longer borrow right back up to 95% and take your home back to the hilt, you can only do it at 90%.

We sat there talking in our office about this today, and it doesn’t really seem like that was a product we were really using much. I think I can count one in the last two years where I’ve had to do a refinance to 95%, and that was really more of a husband buying the property off of his wife and refinancing it through a divorce.

So it’s not a product that’s used very often. It’s odd that they jumped on that one. The rationale is that of course that they want to force homeownership to be a bit more of a savings account, if you will, then people refinancing and using their home as a piggy bank.

The last rule and change that came down had to do with investor properties, so properties when it’s not going to be owner-occupied. Previously you could buy a property as a rental with 5% down. Now you faced some very heavy CMCH premiums to do that, but it was at least something that was technically possible.

Well, the new move by the government is going to restrict all non-owner-occupied properties to requiring a 20% down payment. That’s a substantial market in the Vancouver market, especially all those properties in Columbus and Fall’s Creek and downtown Yaletown that have cropped up. A lot of those condos are investment.

A lot of those people probably got pre-approved with 5% or 10% or maybe 15% down, and they’re going to be forced to complete with 20%. The question that’s going to remain to be seen is: do they have that money?

They didn’t think that this rule would be coming down the pipe when they probably went into those offers, so I suspect we’re going to see a bunch of miscompletions again due to the rule changes, like we did the last time CMHC rules got changed by the government.

The investor market, in my opinion, comprises a very large portion of the Vancouver condo market. In the outlying areas, it’s not such a big deal. But nonetheless, I do think that we’ll have a material impact on the investor demand for properties and could affect pricing in the market at large.

Overall, I think these moves are probably good to try to stave off an American-style bubble. The government’s been good about proactively jumping on this. I don’t know if I agree with the choice of products that they’ve gone after. I don’t really know how that’s going to play out.

Certainly the rental market was getting ahead of itself, and 5% down on a rental property was probably a little bit excessive. It was probably a little too wide open, and they’ve reined it back in to a more respectable level.

If you have any questions or comments on this, please leave them. I’d love to hear other people’s take on this. For the Mortgage Centre, I’m Rowan Smith.

To come soon…

Have you ever wondered if rental restrictions, age restrictions, or pet restrictions affect financing options and availability? This video blog addresses this question.

Transcription of Video Blog:

Hi. It’s Rowan Smith with the Mortgage Centre.

As many of you know, I recently got a new baby puppy that I brought home. As I was bringing him back to my condo, I got to thinking to myself, “I don’t actually know if pet restrictions are in place in my building.” I had to go back and read my condo by-laws, and found that “yes,” there’s no problem bringing pets. You can have any pets you want.

Now, that’s very different. Some buildings have restrictions of size or number of pets or whatnot, but it got me to thinking, “What other restrictions are there out there, and how do they affect market ability of your home?”

There’s really three restrictions that you’re going to see; pets, rental restrictions, and age restrictions. Of those three types of restrictions, pet restrictions have really no baring on market ability of property. I’ve never seen one property sell higher than another, solely because of all things being equal, that the pet restriction was the reason.

Rental restrictions have a very material affect on your resell of your property. If you’re in a building that has a limited number of rentals or has no rentals allowed, and it’s often done because owners take better care of their property then tenants do, it’s just a fact of life. It is harder to sell those homes or they sell for less money, because the investor market is not able to buy it, able to put a tenant in it and earn a revenue off of it.

Age restrictions, the third type, do have a very profound affect on market ability. If you’re in a building that’s 40 plus, 30 plus, generally, they’re very marketable, and you can still finance them quite easily. Where you run into problems is when you’re in a building that’s 55 plus.

At that point, you’ve really started to narrow down the market that is going to be able to buy your property, and how many of that in that market want to live in an age restricted community. You see it a lot in seniors homes where they’re even older. They’re 65 plus, where they just want retirees.

So if you’re looking at one of these properties thinking, “This is a fantastic deal,” first off you’ve got to look at if you’re going to have kids, they’re not going to be allowed to live in the property. Strata council can enact fines against you, and they can block the purchase of something if they really so desire. Now, I’ve yet to see it happen.

But one more note on financing these properties, CMHC cannot insure them. So if you’re trying to put less than five percent down, you have to go with one of the other mortgage insurers. The reason CMHC can’t insure them is because it’s a form of age discrimination, and the government can’t be seen to support any form of discrimination. So if a strata council is preventing people from under 55 from buying it, they’re semi-discriminating. CMHC won’t insure it.

So you either have to have 20 percent down or you have to go to Genworth or AIG as the mortgage insurer. Genworth still has a very good market share in Canada, but AIG has shrunken dramatically and given the recent takeover, I’m not sure if they’re actually still conducting business or not.

So the message from all this is financing a building 55 plus can be difficult, financing it for 30 plus, 40 plus, we can probably get it done and not have very many problems. So, if you know somebody who’s looking in the age restricted building thinking it is a great deal and if it does fit their lifestyle, have them give me a call.

It’s Rowan Smith at the Mortgage Centre.