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Mortgage 101 – Unlocking Your Net Worth | November 16th

Why is owning a home so crucial to building your net worth? In the last pre-recorded segment of the year, Clinton and Todd are talking about assets and building net worth through real estate. They discuss the various kinds of assets a person can have, the value of real estate in net worth, current challenges in the Halifax housing market, and creative housing solutions.

Clinton Wilkins 00:05
It’s November and it’s Financial Literacy Month. Thanks for tuning in and staying and keeping your dial tuned.

Todd Veinotte 00:10
Alright, so what do you think is important that we haven’t covered yet?

The various kinds of assets

Clinton Wilkins 00:12
We’re going to talk about assets, Todd, you know, I think net worth I think is really important. We’re going to talk about what is required to get into a home and why? You know I think owning a home is the best way to build your net worth as a household.

Todd Veinotte 00:25
Okay, let’s talk assets and what, are there sometimes people have assets and they don’t even realize their assets?

Clinton Wilkins 00:30
I think sometimes people do have assets that they don’t recognize or don’t even realize are an asset. I think that happens all the time. You know, I always hear these articles that people have unclaimed funds from the CRA, oftentimes that’s a scam, or unclaimed funds from a bank that you used to use, and there was a small balance there or something. That does happen, probably doesn’t happen that often. But when we talk about assets, and when we are doing a mortgage application, we asked about people’s vehicles, you know, you know, their daily driver, you know, do they have a second vehicle, sometimes they have motorhomes, sometimes they have boats, we put all those things as in as an asset. Sometimes vehicles, you know, can be a depreciating asset, but they’re still an asset. To put those in, we then ask about financial assets. So savings, investments, RRSPs, even if someone has a locked in RRSP, for an old pension that they transferred out from a previous employer, we asked about all of those things. Or if they have a cash surrender value from their life insurance, we put all those in as an asset. We also will put in if someone’s receiving a gift from a family, you know, a gift from mother, father, brother, sister, we’ll put that in as an asset. So there’s lots of different types of assets, but the biggest asset is typically the real estate. So that’s usually a family’s principal residence is the number one asset. And the amount of the net worth is really the value of that asset, less how much they owe.

Real estate and household net worth

Todd Veinotte 01:51
Yeah, there’s been conversation in the past about, a debate, I guess, about net worth, and should your primary residence be considered a part of that net worth? Because in the end, it is somewhere that you live, and I guess, eventually, it’ll be a net worth to somebody. But do you think that that’s a worthy conversation to debate whether or not a home should be part of a net worth or not the equity in the home?

Clinton Wilkins 02:18
Well, I think in my opinion, I’m in in the real estate business. I mean, the mortgage lending business, in my opinion, it’s the biggest piece of a household’s net worth. And in some cases, it’s their only net worth is in a home. So I believe that it is, I think of real estate in some ways as a transaction. I know, I’ve been criticized before to say, you know, I don’t have the emotion about the home. This is business for me. You know, I can see this black and white. And, yes, it’s very high emotion. I understand a home is where the family is. But a home can be made anywhere. And I think in today’s day and age, we talked here before we even started our show that homeownership in many cases is a luxury item right now. This is not buying, you know, an entry level vehicle, you’re buying a luxury item, oftentimes when you’re buying a home, and yes, that home, in many cases will appreciate. And most certainly, if you have a mortgage, you’re going to pay down that debt. So the net worth is going to increase. And most people don’t buy a home and stay in that home forever. They’re buying, selling and trading. And that’s why I have a job. And that’s why a lot of realtors have a job. Because if people just bought their first home and never moved, we wouldn’t have such a bustling real estate economy across this country. Yes, it’s not all roses and unicorns and rainbows and everything right now. Because things are challenging with the interest rates. I think things are challenging with where the values are at. But the values have increased in Halifax, you know, over the last couple of years, but it’s never boomed here. And now I think our values are more steady. It’s certainly more steady here than it is in many parts across this country.

Clinton Wilkins 02:18
Yeah, so the gains that people have realized on their assets, their home, you feel are solid?

Clinton Wilkins 04:07
I think in Halifax the gains are solid.

Challenges in the Halifax housing and rental markets

Todd Veinotte 04:09
Solid, yeah. But there are places obviously where they have not been sold.

Clinton Wilkins 04:14
Oh 100% when we’re talking about Ontario and BC, they are seeing, you know, big reductions in the property values. Obviously, people are having a hard time even qualifying to get a mortgage. And that’s, you know, driving some of these values down because if there’s no buyers to buy, sellers will keep on putting that price down if they need to move that property. And we’re not in that situation here in Halifax, we’re still in a seller’s market because we don’t have enough inventory. And we can see this, we walk and you know, out on our streets. And I’ve heard reports, you know, there’s so many unhomed people here, and the unhomed have really increased over the last couple of years. There are people that are unhomed who work and have regular jobs that can’t even break into the rental market, because the rental vacancy is at 1%. So that’s where it’s really tough and I can really feel kind of the pain. Our office in Dartmouth is at 99 Wyse road. I know you’ve been over there Todd, and we’ve done the show over there for years. And next door, it used to be the hotel. And they, you know, stopped operating. The province has leased the hotel for the next several years. And they’ve turned this into basically a shelter to home people. And there are people that work there. And I’ve talked to them, that they go and work. They’re below the poverty line, but they’re still working, and they’re bringing in some income, but they can’t afford to get even into the rental market, which is really tough. But there’s no vacancy for them to even get in if they had the ability to pay.

Housing starts and creative solutions

Todd Veinotte 05:42
Yeah. So I think it’s important, though, when it comes to housing starts. And that’s another challenge. That’s another issue altogether. But as housing starts, the more the better, right? Because the more units, or wherever you want to call it, the more dwellings, that will trickle through the system.

Clinton Wilkins 05:59
You know what, I think we have so much demand here in this market that you know what, we can even open it up to fair market and just go crazy with the builds. And we still wouldn’t have enough. We’re certainly seeing more and more units coming online, which is great news. There’s construction all along Robie Street, which is awesome. And in lower Sackville, they talked about the mini home, I’ll say tiny home complex that they’re building, which I think is really, really cool. And we need to become more creative with housing. I’m talking to clients all the time that are talking about creating an in-law suite or creating, you know, a laneway home, because the municipality certainly has become more flexible in different types of housing situations. And we need these, I think, for homeowners just to supplement their income. So that’s one. But it’s also to get a roof over people’s heads.

Todd Veinotte 06:48
Yeah and the province has incentivized what they call backyard suites as well with a forgivable loan, I think it’s about $20, $25,000 that they rolled out just this week. So I don’t know that that would perhaps put somebody over the top when it comes to being able to do one of these things. But I think somebody might be on the fence to put a backyard suite in. It might help, right?

Building net worth through real estate investing

Clinton Wilkins 07:07
It might help. And another great way to build net worth and we see this every day is people buy rental properties, and they buy second homes. And even they buy a more expensive home than they have now. It’s a great way to build a net worth. So just for example, let’s say on average, our real estate prices in Halifax go up 3% per year. I’m just using this as a round number. If you have a $300,000 house, okay, what’s that going up $9,000 a year? But let’s say you have a $500,000 house, that’s going up $15,000 a year. So you know, in building net worth, there’s so many different ways you can do it. You can save it, you can invest it, and you can buy real estate. And hopefully the values will continue to go up. And hopefully over the next several years, you can pay the debt down. And I think it’s a great way to build the net worth.

Todd Veinotte 07:53
Well this is our last pre-recorded show of the of the year. The next shows, again, a reminder, we’ll be live in studio, in my studio. So remind people about that.

Clinton Wilkins 08:01
Yeah, we’re gonna be on November 16th and 30th on CityNews. So certainly tune in, if you want to call in we’d love to have your questions. And it’s our last regular show of this 2023 season. So I want to thank all our listeners that tuned in. Our loyal listeners that have listened to us on our podcast, have watched us on on social media, have listened to us on the radio on News 95.7 or listened online. And we wouldn’t be here if it wasn’t for the listeners. And, you know, we’ve done the show now I think five years Todd, and, you know, there’s just been so much that we’ve been able to talk about which has been great.

Todd Veinotte 08:38
Absolutely. So I will see you later in the month Clinton.

Clinton Wilkins 08:40
We’ll see you soon.

Todd Veinotte 08:41
Okay, Mortgage 101 your guide to homeownership with Clinton Wilkins and myself Todd Vienotte. Thanks for listening.

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