In a post dated May 7, 2010, I alerted readers that Canadian mortgage insurers were not insuring “non-conforming strata” properties. For the full post read here.
I subsequently wrote an update post on May 19, 2010 advising that the decisions by the mortgage insurers had been reversed and all was okay again. Read more here.
During that time frame, most lenders I spoke to had no issues providing that financing for those types of properties on a conventional basis (equity of 20% or more).Therefore, I thought the issue had died since the insurers were again okaying them. All was good again.
Well, apparently not. I was just sent an email this reader of this blog and was told of a potentially serious problem that he had with a lender. I have his permission to publish what he sent me but he wanted to remain anonymous. This is what happened to him.
I wanted to thank you for your above noted article. My wife and I have recently agreed to purchase a new property that is part of a non-conforming strata. The purchase completeion date is later this month.
We were pre-approved for the mortgage on the new property by Coast Capital, which holds the mortgage on our current property. Coast Capital was informed that the new property is non-conforming with no Form B, no regular meetings, and no minutes of meeting. Coast Capital was also aware that we would be putting more than 20% of the total mortgage value towards a down payment.
Coast Capital informed us after we had removed all of our subjects on the purchase agreement that it could not provide us with a mortgage for the property because it is non-conforming despite our significant down payment. This has left us scrambling to find another lender at the last minute.
We are now working through this issue with our agent and broker but I wanted to let you know what my wife and I recently encountered with Coast Capital and encourage you to publish more articles on this issue because there appears to be a lack of understanding about this issue amongst agents, brokers, and lenders.”
This was the first time since early spring of 2010 that this issue has creeped up again. I have sinced spoke with a handful of lenders and have been advised that there are no changes to their guidelines and are okay with these types of properties.
I was informed by the writer that he did manage to obtain financing elsewhere and it appeared that all turned out okay. I wish to thank him for writing me and telling me his story.
Aside from the potential problems with properties of these types, I would also like add an additional caution. NEVER, EVER remove the subjects on a property unless you are 100% certain that the financing is in place. Even if you are pre-approved make sure you have a firm commitment from the lender before doing so. The type and condition of the property may be the problem and not you.
As always, I want to hear from you.