Lac Ste. Anne County Rezoning for RV Use

“Mortgageability” And What It Means To You

WHY DOES THE ABILITY TO PLACE A MORTGAGE ON YOUR PROPERTY AFFECT YOUR RESALE VALUES?

You may not be aware that when you are applying for a mortgage, the property has to qualify just as much as you do. There can be many instances why a bank will not lend on a property, such as:

• It is reaching the end of its economic life and the bank wants to know that the house will last longer than your 25 year mortgage.
• The property may be a mobile home and the bank needs to know it is properly affixed to the foundation and to current building code standards, so it doesn’t “disappear” one day and they lose their security.It doesn’t have potable water or sewer/septic, or year round access.
• The property could be in a state of excessive disrepair.
• The home is smaller than the minimum square footage requirements for that lender.
• The bank may not like the way the property is zoned.

Lenders will look a variety of criteria and you must hit every single one of their boxes in order for them to lend on the home. So why does a lender care about all these things?

Banks/lenders have to look at the risk they are taking - both for their shareholders and because the government mandates them to. If you are buying with less than 20% down payment, it is a law in Canada that your mortgage must be insured to protect the banks from any potential losses. There are 3 insurers in Canada. You pay the premium on this insurance and the bank is protected if they have to sell it at a loss during foreclosure. Some lenders will require you to have this insurance even if you have more than 20% down payment in order to protect themselves. And then there is a whole other conversation about bulk insurance that we won’t discuss. Mortgage insurance qualification is extremely important because the insurer can (and will) veto a bank’s pre-approval based on many variables. The ability to have this insurance also permits buyers to look at a home with less that 20% down payment.

It is extremely easy for a property to be devalued by more than 20%. A property is only worth what someone is willing to pay for it. A home in bad condition or in a bad location can quickly lose value. For example, having a gas station built next to your home could cause the values to decrease. Or being on a busy road can also impact your values. Sometimes even minor cosmetic fixes can improve the value of your home. This is why it doesn’t take much to make a bank squirm and the banks are not in the business of losing money. They are concerned about hundreds of thousands of dollars being on the line in a single mortgage and whether they can quickly sell the home if needed.

Now let’s speak specifically about the zoning piece. The County of Lac Ste. Anne is wanting to rezone 17 or so subdivisions due to excessive non-conforming use within those neighborhoods. Non-conforming use is when property in the neighborhood is being used for purposes that are not allowed by the municipality’s bylaws. In this specific case, the non-conforming use is the use of vacant land to house multiple recreational vehicles for camping purposes without a permanent dwelling/house/cottage on the same land. Some people don’t want to live in a residential subdivision that is being utilized like a campground, so they won’t buy the home to raise their family. 

One of the insurers specifically said their concern is “these lots could end up being large camping-type sites and that limits the appeal for people wanting to buy regular homes in the area”.  So the proximity of lots being utilized exclusively by RV’s, to lots being used as homes, could affect the resale appeal of the home in their opinion.

At first the County wanted to call the zoning recreational. Very few banks will lend a mortgage on a house zoned recreational, and I did provide proof of that to my counsellor via bank policy manuals and email responses from the lenders. Now they are changing the zoning name to Rustic Residential to try and mitigate that risk for the residents who own homes in these neighborhoods. As a result, I canvassed the exact same lenders and most said they would treat it the same as recreational, because it is just a different name for recreational and the use is still the same. Some said they would only do it if it was insured. Well that was promising so I asked CMHC and Genworth if they would have a problem with the new zoning since I have had declines on this type of property zoning before. Both have advised that they have declined these types of “mixed use” subdivisions and will continue to do so as they become aware of them. Once a subdivision is “black-listed,” there is no going back. Every time a property in one of those postal codes is applied for - it will be manually checked to see if it is in one of those subdivisions.

So what does this mean for the houses that are already existing in these neighborhoods? If you have a single family dwelling and you have a buyer that qualifies no problem for the mortgage, they may still be declined because it is a “mixed use” subdivision. That buyer may be told by the bank that they need to put 25% or 35% down payment. Or maybe the bank isn’t interested at all and that buyer would need to pay cash. How much is your home worth if half the people who are interested cannot get financing?

This lack of available financing then causes a marketability spiral. Some people would still want to buy the home regardless but don’t have enough down payment (or don’t qualify at the only banks that offer the 35% down payment option). As prices drop, lenders become even more cautious and it then becomes a race to the bottom. It’s a self-fulfilling prophecy, they don’t lend out of fear of declining property values, which in turns means less sales, which causes values to decline.

So then what? The young family who originally bought in a neighborhood that is no longer what they purchased into, and bought with 5% down payment may be in a position where they have to pay tens of thousands of dollars to sell. Why? Because property values have declined to a level where their mortgage is now higher than what they can sell their home for. Or they have to choose whether they continue to raise their family in a campground setting. 

Make no mistake- they purchased into a property zoned as a residential subdivision and that is being changed on them, through no fault of their own.

I don’t think most people realize that it is significantly harder to qualify for a mortgage these days than it was even 2, 5 or 10 years ago. Having a property that is virtually unmortgageable is certainly not going to help.

I have no alignment or agenda except that if I elect to keep my home (which is my primary residence, not my 2^nd home and yes it is in one of these neighborhoods), I have been told to expect a significant decline in values. I can’t and won’t set myself back that much financially. My agenda is that the people who live by me - need to know the ramifications of what is going to happen to their equity if they stay. I didn’t even think about this until I was trying to finance a property at Pigeon Lake and it was declined for being too “recreational” even though it wasn’t zoned recreational. 

Council needs to know what they are knowingly doing to young families who reside in this County. The “Recreational County” as they called it at the last Information Meeting. That slogan won’t raise any red flags with insurers…(sarcasm).

I can tell you, many residents in our subdivision have lodged complaints about the non-conformance issues for the last 4-5 years. Everyone has their own reason based on the specific challenges they have faced. This isn’t a new problem, it is an escalating problem. We have incurred considerable expense to appeal this type of use at SDAB hearings and nothing has changed. This is the Council’s and Administration’s agenda. Every subdivision within that list of 17, will be painted with the same brush.

Everyone has a different opinion. Some subdivisions are OK with the proposed rezoning and some are not. And at the end of the day - that is also OK. Everyone is entitled to their opinion and everyone should be heard.

I wish you all well in whatever decisions you need to make about your homes, where you reside, and what this will mean for you personally. But as an owner of property in the County of Lac Ste. Anne - you now know more about mortgages than 80% of the population, and we haven’t even scratched the surface.

LSAC COUNCILLORS     LET THEM KNOW HOW YOU FEEL

Joe Blakeman | Reeve, Councillor, Division 5

Email jblakeman@lsac.ca Ph. 780 918-1916

Lorne Olsvik | Councillor, Div. 1

Email lolsvik@lsac.ca Ph. 780 937-5360

Nick Gelych | Councillor, Div.2

Email ngelych@lsac.ca Ph. 780 9039393

George Vaughan | Councillor, Div. 3

Email gvaughan@lsac.ca Ph. 780 967-3469

Steve Hoyda | Councillor, Div. 4

Email shoyda@lsac.ca Ph. 780 674-8080

Ross Bohnet | Councillor, Div. 6

Email rbohnet@lsac.ca Ph. 780 786-4290

Lloyd Giebelhaus | Councillor, Div. 7

Email lgiebelhaus@lsac.ca Ph. 780 785-2095