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Archive for the ‘Unique or Unusual Properties’ Category

What Properties are Hard to Get a Mortgage On? Vancouver Mortgage Broker Rowan Smith Explains

Sunday, March 25th, 2012

Transcript of Video Blog:

Hi everyone. Rowan Smith from the Mortgage Centre. I want to talk today about properties that are difficult to finance. I’ve run into a whole bunch of these in the last couple of weeks so I thought it would be pertinent putting out an actual post to explain properties that you may or may not have problems with.

First off, log homes. A lot of lenders just have a policy they don’t lend on log homes. I don’t really know why it is. I guess they view it as a slightly inferior security or a fire risk or what have you but log homes can present a problem. There’s lenders that will still do them, though.

Former marijuana grow ops. Another big one. There is lenders that will still do those. Check my other posts on the side. There’s plenty I’ve done on what you need to for a former grow op. Another property that often appears very, very appealing to investors but are difficult to finance are residential homes that have more than four living units. Anything with four units or less is generally considered residential. As soon as it hits five it’s considered a commercial mortgage or commercial property.

If you’ve got a home that’s got two basement suites, a loft, and a main floor that’s residential. They’re all over Vancouver. If you’ve got something that’s got two in the main, two lofts, and two basement suites that’s six. Again, there’s several of these older, larger character homes throughout Vancouver. It’s technically a commercial mortgage. You’ll have a lot of problems with the banks.

Properties that are sitting on large parcels of land, acreage, or they’re very rural. Banks don’t want to be sitting on something in foreclosure for months and months or years and years and years. If something’s massive acreage and if the land makes up a disproportionately large percentage of the value it can be tricky to finance those as well.

Float homes, mobile homes, manufactured homes, homes that are sitting on concrete blocks even if it’s the norm in the area are all quite difficult to finance in many cases. Commercial properties, whether it’s a strata property or whether it’s a massive commercial industrial process you need to be dealing with a commercial bank, commercial lender, or commercial mortgage broker for those.

That’s an example of some properties that can be difficult to finance for one reason or another. If you know any people that have properties like this they’re looking at, they’ve fallen in love with, and just because the bank doesn’t think it’s a great idea doesn’t mean it’s not a great purchase and not perfect for you. It may well be.

In those circumstances, please give me a call. I may have a solution or a lender that you’re unaware of and still get you that same great rate that you see on TV. My name is Rowan Smith at the Mortgage Centre.

Former Grow Op Updated – By Vancouver Mortgage Broker Rowan Smith

Thursday, October 6th, 2011

Transcript of Video Blog:

Everybody, Rowan Smith from the Mortgage Centre. I’m here today to talk again abut a topic that seems very popular among my blogheads, which is former marijuana grow ops. Can you finance them, or how to finance them? The answer is, “Yes, you can,” and the way to do it is this. There’s typically going to be extra underwriting that’s going to be required. Not all banks are going to be willing to do that… Read the rest of this entry »

Former Grow Ops – The Noose Gets Tighter

Saturday, September 25th, 2010

Transcript of Video Blog:

Hi, everyone. It’s Rowan Smith from the Mortgage Centre. I want to talk today about the ever-tightening noose that’s slowly closing around the neck of former marijuana grow-op properties.

Now these properties in the past, we always had some credit unions and some smaller institutions that really had more of a make-sense approach to this, to financing former marijuana grow-ops. But the list of lenders that does it has just gotten smaller and smaller and smaller, and those few that do still do it require an extensive amount of documentation up front.

Now if you’re looking at one of these properties, these former marijuana grow-ops, and you want to buy one, and you think it’s an amazing deal, chances are it’s an amazing deal because most people can’t get financing on it. Most banks won’t do it.

There are a couple of institutions. I’m going to use an example, VanCity Savings. I sent a file in to them recently. It was a former grow-op, and they told me after the fact, once they had funded it, this will be the last one that they’re going to do through the broker channel. So they’re not going to be doing former marijuana grow-ops any longer.

Well, that was one of our primary institutions. But think of it from their point of view. When you’re one of only a handful of these companies that’s still doing these products, your book is going to get loaded with these applications, and people may only use you for that type of a product. That’s not what any bank wants. They don’t want themselves to be known as the institution that finances former grow-ops.

So if you’re looking at one of these properties, we need to do some due diligence ahead of time. Things you’re going to need: you’re going to need a full appraisal on the property to make sure the market value’s there. You’re going to need an environmental air quality sample. This is going to cost about $1, 000 to $2, 500 depending on the property.

Now a smart seller will go get this stuff in advance, and this message is for Realtors, too. Realtors, if you’re listing one of these properties, make sure to get this stuff up front. It’s going to mean that you’re not going to go through eight offers and all the stress and everything. You’re going to have all the paperwork you could provide.

Some municipalities are doing to ID occupancy permit reissue program, where if it’s a former grow-op that’s busted the city yanks that occupancy permit, and they only reissue it once the appropriate fire and chemical and environmental reports have been obtained. In those circumstances, you’re going to have to get that reissued occupancy permit.

It’s a huge hassle, because you have to go to the city hall and deal with them to get it. “Who are you? You don’t even own the property. What right do you have to this information?” It becomes a fiasco. You’re going to need the buy-in and the assistance of the selling Realtor and the seller.

In summary, what are you going to need? An appraisal, environmental and occupancy reissuance or some sort of proof from the city that electrical and everything is up to code.

There could be differences, because a few municipalities are not on the reissuance program. Some issue comfort letters. An example is Surrey. Some of them reissue the actual occupancy certificate. You need to know what you’re dealing with, and you need to deal with a broker who knows what municipalities do what.

Now I used to do a lot of these things nationwide, and I’ve retracted to only financing former grow-ops in the BC market, the reason being is other markets, particularly Toronto, where I used to get a lot of these applications, the only lender that would look at them was HSBC, and they’ve now exited the broker market.

I can’t help any more in that matter. If you’d like to try HSBC directly for those people that are back east, go ahead and give them a try. But for now, I will be restricting my activities financing former grow-ops to British Columbia alone.

For the Mortgage Centre, I’m Rowan Smith.

Appraisal – When Is it Needed When Getting a Mortgage?

Wednesday, February 24th, 2010

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.

How do Restrictions in Your Condo Affect Your Financing?

Saturday, February 13th, 2010

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.

Farm Mortgages – Farm Financing – How to Borrow On Your Farm

Thursday, November 26th, 2009

I get many calls from people in rural areas wanting financing on their farm, and they’ve often been to every bank in town and cannot get any financing beyond 50% of the value of their property.

This is normal in the current economic environment.

Alternatively, a farm owner sees my residential real estate ads for great low rates and calls me only to get angry at me when I tell them they aren’t eligible for this program due to their house being a farm.

In this article, I’m going to cover out why farms are hard to finance, why banks won’t usually get involved in financing farms, and what alternative programs are available for borrowers (including some details of the government backed CALA loan program).


The primary reason that banks and private lenders don’t lend on farms is that they nearly impossible to foreclose on. As a lender, if a borrower doesn’t make payments, you can issue a notice of demand, and start the foreclosure process whereby you take over the property in 6 months time, or force a sale to recover the money you loaned to the borrower. In BC, it is around 6-9 months from start to finish, and this is assuming it is a CLEAN foreclosure with no loop-hole jumping, obfuscation by the borrower, and funny business. However, when you try and take someone’s home, you can expect all of the above.

There are special laws in Canada protecting farmers and their rights. If someone is a mechanic, and you foreclose on him and take away his land, he is still a mechanic. If someone is a farmer and you take away his land, you’ve left him destitute with no means of earning an income AND no home. Clearly the courts don’t want to deprive someone of their ability to live AND work, so there are special provisions whereby if a person is raising ANY crops: even just one sheep, or growing one stalk of corn for resale, they can apply for protection under these laws and prevent foreclosure or court ordered sale (or at the very least, make the process drag out forever…)

For this reason, banks are “out” of the farm financing game for the time being. A couple of years ago (basically from 2001 through 2006) getting mortgages on farms (and anything else, for that matter) was far easier. Money was loose, lenders were flush with cash, and times were good. Since the capital markets dried up in late 2008, it’s a new paradigm of lending, and the properties that are tough to finance now are: farms, fractional interest, and limited time use properties. These three types of property represent the greatest challenge for brokers, and many don’t have a clue how to get them done, or what programs even exist.

The second reason that farms are hard to finance is that farms, like most tax payers, write off as many things as possible so as to minimize their tax payments to government. While this makes great sense to the individual at tax time, it makes financing hard. Banks have “debt servicing requirements” which is a fancy way of saying, “proof of income sufficient to make the payments.” They only use net taxable income (line 150 of your Notice of Assessment or T1 General). If you’ve written off all your income so that you have no tax bill, good luck getting financing. You either win at tax office (by paying less tax) or you win at the bank (by getting the lowest rate in town) but you rarely win at both – and if financing a farm, you likely will NOT win at both.


So, if not the banks, where do you go? If you’ve been to the banks (and ESPECIALLY if you write down your taxable income) you’ve been told “NO” more times than you can count, and they’ve likely made you feel like crap in the process: as if you’re trying to finance something illegal or financially dangerous!

There are three primary sources of financing:

1. Farm Credit

2. CALA Financing

3. Private Lenders

Let’s look at each in turn.


There is a division of the Federal Government, Farm Credit Canada ( that assists farms and agricultural business with financing. This program is government run and backed, and provides loans, mortgages, and venture capital. Check out their website if you’d like more information on them. They are NOT available through brokers, and the client has to deal direct.

You can expect a lot of highly specialized and detailed questions about your farm’s output in terms of bushels, bundles, crops, livestock counts, and everything else. If you don’t know these numbers, or are too new to have them in a cohesive business plan, then Farm Credit Canada is not for you. This organization, it’s loans and programs, are more suited to large scale farming enterprises with accurate record keeping and a history and track record of success who are either a.) Looking to expand their product, or b.) Looking for working capital during off seasons.

I personally have had very little success working these programs with borrowers. I, as a broker, have had to stand aside and let the client and Farm Credit deal directly and they cut me out of the process. Therefore, my details regarding Farm Credit are slim. Check out their website and do an application if you think you qualify.

If you are a small single man operation, this isn’t the program for you.


CALA is an acronym for Canadian Agricultural Loans Act. This is a government backed financial program that provides a guarantee to lenders for up to 90% of the loan. This way, if the lender makes a loan, they are 90% covered should the loan go into default and the lender end up in a situation to lose money.

A couple of points regarding these loans:

1. They are available for new and existing farmers (new farmers are those in the business for 6 years or less)

2. They are available for land purchases, livestock purchases, equipment, storage, or just about anything else the farm will require

3. The rate maximum the banks can charge is prime + 1% on a variable and their residential rates + 1% on a fixed rate meaning this is very cheap money!

4. The maximum percentage financing of the farm they can offer (loan to value) is 80% of appraised value or purchase price

5. $500,000 loan maximum for property purchases and $350,000 maximum for everything else

There are a number of exclusions for which these loans cannot be made. For example, “operating lines,” permits, personal vehicles, or construction and improvements to a family dwelling. It must be FARM financing.

These loans are theoretically available through any bank, trust company, credit union, or other financial institution. However, experience has shown that most institutions don’t get involved in this type of lending. I have calls out to Agriculture Canada as well as several institutions and will update this post as soon as I get a firm answer on who is lending under this program. UPDATE UPDATE: I sent an email to the CALA administrators, and they have said that in the last 4 fiscal years only TD Canada Trust and Bank of Montreal have funded mortgages and loans under this program. To their knowledge, no other lender is using the CALA program.

Also, you will not be getting residential mortgage repayment plans. So, you can say goodbye to the 35 year amortized mortgage. Land loans under this program can only be 15 year repayment period, and 10 years for all non land loans. So, you will face some larger payments than you likely expected. There are also some other fees that add up to around 1% that the borrower can be expected to pay to register the loan and get it administered by the government.

For a detailed list of lender guidelines, go to and you can read all the fine print about the program.


Private lenders are often overlooked as a source of financing because of their higher rates. Private lenders will typically lend as a 1st mortgage at 6.25% up to 13% (or higher) depending on the level of risk, percentage of the farm’s value borrowed, location of the farm, and credit worthiness of the borrowers. 2nd mortgages are available at rates of 9% to 16% (or higher) depending on the same factors.

Most people read those rates and say, “Well that is just ridiculous. Who would pay those rates?” The answer: a LOT Of people. If the CALA loans are low interest rate, but must be repaid over 10 years versus a higher rate repayable over 25 years, let’s see how it works out assuming a $100,000 1st mortgage.

CALA loans used for plant and equipment (10 year repayment) would have a payment of $1,070 based on a 5.25% interest rate. Also, the money would have to be accounted for, proven to be used for eligible expenses, and all the other rules followed “t’s” crossed and “i’s” dotted.

Private loans at 12% for the same amount over 25 years is $1,054 per month. So, from a cashflow standpoint, it’s basically the same amount, and in this case, slightly less to take the private money. Also, with private money, you simply get a cheque and go spend it on what you want, you likely won’t have to account for it, file expenses, or all that nonesense.

Some private loans are available on interest only terms meaning only the interest has to be paid and the who amount paid some time in the future (perhaps after you’ve built and expanded production and have the higher revenue).

So, there are three different avenues for you to investigate if you are a farmer (or hobby farmer) looking for financing. If you want details specific to your situation, don’t hesitate to give me a call at 604-657-6775 (my direct cell) and I’ll see what we can work out for you.

Thanks again for reading!

Purchasing a Recreational Property – Vacation Property Financing

Friday, August 22nd, 2008

This is part three of my three part series on refinancing to invest or buy other property types.

Many buyers assume that the rules that apply to buying a recreational (vacation) property are the same as those that apply to buying a home. This is incorrect. The rules for obtaining financing on a recreational home are very different as there are a number of new concerns that the buyer likely doesn’t face on their existing home.

When purchasing an owner-occupied property (your home in which you live) the government will let you purchase with 5% down (until October 15, 2008 you can actually buy with 0% down). However, when purchasing a vacation property (which likely does not have a steady rental income) you will be expected to put up a larger down payment. If the property is VERY rural and is, say, located on an isolated lake with no power and a gravel road, you likely will have to put up a much larger down payment (could be as high as 35% or 40%) depending on the property. When most buyers see 35% down they immediately ask “why???” and the answer is not straightforward. However, if it was summed up in a single word, it would be “property.”

When the bank does a mortgage on a property, they are looking at the deal as a “what if the worst case scenario happens ” type of basis. They want to be sure that if they have to foreclose on the property and take it away from you, that they can sell it in a reasonable amount of time and get their money back. Recreational properties (rec properties for the rest of this article) are much harder to sell in a quick sale, and often stay on the market for many months (or even years) before a buyer makes an offer. This problem is amplified even further if the property is located in a very remote location. If the property is just raw land that you intend to use for future construction, financing may not even be possible at 50% of the price as lenders will have an even harder time offloading the property in the event of a foreclosure. If you go far into arrears and are unable to make payments (regardless of the reason) the bank could be using that money elsewhere with a paying client. There is an opportunity cost that they face by lending you the money – that cost is the opportunity of lending it to someone else. If you are in arrears, and as the arrears pile up, the equity you have in the property gets eroded more and more with each passing month. If the bank is foreclosing and they want to drop the price a bit to get a faster sale, they can’t if the interest has piled up and if you didn’t have a large down payment in the first place. For this reason, they will want a larger down payment the further and further out the property gets and the more remote its location. For this reason, the property is the most important issue.

You will need to be able to show sufficient income to cover your existing mortgage payments (if applicable), all other debt payments, and the new mortgage payments. While this sounds straightforward, it becomes surprisingly hard if you are paid commissions, work a lot of overtime, or are self employed. While proving the income might not be impossible, doing so in a manner that satisfies the lender that you can afford the payments may be difficult.

Perhaps you have plans to rent out the property most of the year to vacationers and only use it yourself for a few weeks a year. This could generate a healthy bit of income. However, this is a very tough number to predict unless you have a regular tenant in the property, and in most recreational areas, this is not possible. Unless there is a contract with a certain amount of rental income guaranteed every month, the bank will not factor in any rental income. If they do, this property couldn’t be used for recreation and would be a standard investment property and would fall under standard investment property guidelines. Given the importance of property to a bank’s lending decision, a recreational property would likely make a poor investment as rental income would be very limited if at all available – depending on the property’s location.

Many times, banks flat out refuse to finance certain recreational areas or rural areas due to internal policy. There can be a number of reasons for this, but it is usually driven by the bank’s own guidelines and desire to lend on properties in “prime” areas that are saleable quickly and with minimal hassle in the event of foreclosure. If the banks decline you, that does not mean you cannot get financing, however. There are several non-conventional or non-conforming lenders that will charge a higher rate of interest, but who WILL lend on hard to finance properties. Many of these lenders (perhaps 99% of them) only deal with mortgage brokers, and for this reason you should seek out the services of a qualified mortgage broker who can connect you with lenders across the country that will lend on rural or rec properties. This is commonly referred to as “Private Financing” and is often more expensive. Private mortgage rates, historically, have ranged from 9% to 15% depending on how rural the recreation property is, what percentage of the property’s value you will be borrowing, and the credit worthiness of the borrower. The good thing about private financing is that income often doesn’t matter, and for this reason, a lot of recreational properties are financed this way.

This actually makes financing even harder as the banks generally do not like to finance raw land. They usually will only lend based on the house (or cabin) on the property and 10 acres of land. Otherwise the deal becomes predominantly a land deal and they treat it as such, even if it has two homes on it! Development potential is also very difficult to finance because the banks are being asked to lend money TODAY based on the value TOMORROW. This is something that they simply will not do. If a property has a lot of development potential built into the price, or is very large acreage, this can make financing it very difficult.

When you are buying a rec property for, say, $200,000 the banks will only lend whatever they will lend. However, they will not base it on the purchase price. They will base their willingness to lend on the “appraised value” of the property. They will almost certainly demand that an appraiser (often from their list of approved appraisers) drive to the property, walk around on and in it, take photos, and prepare a lengthy and detailed report. In a normal purchase of a normal property in a city, the cost for this usually is less than $300. However, with a recreational property, often in a remote location, the appraiser has to drive far out of their way to get to the property and the cost can run as high as $800 or $1,500 depending on the lender’s requirements. For this reason, it is good to have an appraisal in hand BEFORE going to bank for financing as it will guide their decision much more strongly than in traditional purchase situations.

Clearly, there are a lot of concerns when buying a recreational property, and it is a good idea to talk to a mortgage broker that is used to financing properties in remote locations with unique characteristics. As their advice often costs nothing to obtain, it is in your best interests to seek one out to shop for you and get the best rate, terms, and structure that fits your unique financial situation.