It is forever in discussion in the Lower Mainland – is a former grow-op home a good investment? Prices are often much lower than similar properties so at first glance it seems so. But the stigma will follow the property in perpetuity, unless it’s razed to the studs and rebuilt. If it’s been remediated that means it’s perfectly fine now, right? Not to the banks.
This is an era where lenders are being very conservative with the Office of the Superintendent of Financial Institutions (OSFI) clamping down on policies. Prior to the sweeping mortgage rule changes that came into effect in July 2012 there were at least a dozen lenders with products for remediated grow-ops. That list has now been whittled down to about 5 credit unions in BC and a handful of private lenders.
What you can expect from these offerings is that no matter how much you can put down or equity you have the credit unions are requiring mortgage insurance (CMHC or Genworth) so you will have the premium added to your mortgage and you can expect a 0.50-1.00% bonus added to the interest rate – not to mention an additional lender fee on top of all that in some cases.
While the price of that home may be much lower than comparable properties without the stigma it can cost you in other ways.
Lenders are being conservative with a view to the re-sale marketability factor. If the stigma will stay with that home forever, will there be many people willing to buy it if you decide to sell – or if that bank needs to foreclose and sell the house itself. Not to mention, with so few and costly financing options how many potential buyers will brave that process.
Buyers that acquired remediated grow-ops prior to July 2012 who are now coming up for renewal are finding themselves with very few options. A recent client was hoping to secure a better rate, consolidate some credit debt and lower their payments was forced to simply renew with their existing lender at a higher rate than the rest of the market and it was just too expensive to tap into his equity.
If you make the decision to buy a beautiful home with a dubious past remember to always ask one of the qualified mortgage professionals at Dominion Lending Centres to help you find the best financing.