News Update: News 95.7 – February 4th

On 95.7 News Radio, Clinton and Dan discuss the Nova Scotia’s first-time home buyer program, reducing the down payment from 5% to 2%.

Dan Ahlstrand
Welcome to this, the midweek Wednesday edition of the Todd Veinotte Show. I’m Dan Ahlstrand, very glad you’re able to spend some time with us today. One of the big announcements that came out of the province yesterday has many people talking today. It was the water cooler talk around here yesterday. The province announced a significant change for first-time homebuyers, lowering the down payment to 2% from from five, which is a significant drop, and also backing those mortgages, which means that somebody taking part in this program won’t have to pay that mortgage insurance which is a significant chunk of money when you take a look at it. When it comes to things mortgage, we go to our mortgage guru. The host of Mortgage 101 and mortgage broker extraordinaire. Can I call you that?

Clinton Wilkins
I don’t mind. You can call me whatever you want, as long as you call me!

Dan Ahlstrand
That’s Clinton Wilkins, of course. And Clinton, when you saw this kind of come out of the blue yesterday, what were your thoughts on this first-time homebuyer program?

Clinton Wilkins
Let me tell you, it was very busy, and I was getting inquiries from across the country. I sit on a national board and, as more than a professional, in Canada. I represent Atlantic Canada and the interests of our industry, consumers, lenders, etc. So let me tell you a very, very busy day yesterday and into today. I think any change around, enabling home ownership, is good for Nova Scotians for me. Obviously, there are some pros to every program, and there are cons to every program. Dan, to give you kind of the nuts and bolts, this is a pilot program. So this is not necessarily something that is going to stay forever. Certainly, it’s very exciting. It creates some buzz in the media, obviously, like we’re here, and a lot of people are talking about it. So the way that the program is going to work is it’s going to be run by participating credit unions here in the province of Nova Scotia only, and it’s really based for first time homebuyers. Anyone who hasn’t owned a home for four plus years could potentially qualify for the program. And the way that it works is that you’re going to make a minimum down payment of 2%, so that means that the credit union, backed by the province of Nova Scotia only going to lend the rest of those funds. Obviously, that’s great. You don’t need a lot of skin in the game. I think overall, when I’m a kind of industry person looking at the program, one of my bigger concerns is 2% isn’t a lot of skin in the game. But I feel like this pilot is potentially looking to replace the Nova Scotia Down Payment Assistance Program, which we were already running in Nova Scotia. And Nova Scotia was unique. Obviously, different provinces have different programs, but we had a pretty aggressive program here in Nova Scotia already, where the Province of Nova Scotia was lending first-time home buyers, and only first-time home buyers, 5% of the down payment. Obviously, there are constraints around that program. For me, as a Nova Scotian and as a taxpayer, I do have concerns that the Province of Nova Scotia is backing mortgages for 25 plus years. A lot can change. As we know, in the economy, housing prices across this country are down somewhere around 20% where in Nova Scotia, we have not had these losses, thank goodness. But I’m not saying that there aren’t going to be price changes in the future. And the way that this program will work is that the province is going to back these credit unions for losses. We already have a federal agency that is doing the same type of thing, and that has been around since the war, war times, the Canadian Mortgage Housing Corporation. And we have two private insurers. We have Sagen and Canada guarantee that are providing high ratio insurance to all lenders, including credit unions, and they’re the ones that are covering these losses. So for me, the province getting into the mortgage back game is a little bit concerning. I don’t really know risk there. There certainly is a risk for a long, long time, right? The challenge is, and I’ll just going to be completely frank, typically, the rates at a credit union are higher than you can get at a chartered bank or a mortgage finance company, orthrough a mortgage broker, we’re talking one or 2% higher typically. So there is an additional cost of borrowing. Typically, when you go to a credit union in the province of Nova Scotia, different credit unions across the country obviously have different models, but primarily, the cost of funds here at these credit unionsise higher than a bank-style lender. So I think that’s one thing to take into consideration. The other thing is, when you do not have high-ratio insurance from CMHC Sage and Arcana guarantee, you can’t. Move your mortgage from lender to lender. So you will be stuck at this credit union probably for a long, long time. I’m talking like 10 to 15 years likely before you’re going to be able to move to another lender, right? You’ll only be able to move to another lender when your mortgage is at 80% or less of the market value of the home. So, unless we see big, big property value increases in the near future, the borrowers who are going to take part in this program, just beware, you’re going to be stuck with this lender for a long time, and you just will not be able to move.

Dan Ahlstrand
Lots of caveats attached to this program. Well, household income of $200,000, which I think is good. Normally, we get these programs, and sometimes that limit is pretty low.

Clinton Wilkins
I think that’s quite fair, especially for a first-time home buyer. Now, there are property value limits as well, right?

Dan Ahlstrand
$570,000 within HRM and then outside, including, I think it was hence, then the rest of it, $500,000 now, Clinton, you and I have talked many times about house prices here, and you suggest that that about $600,000 is the sweet spot, particularly in HRM, with these relatively low and the minister himself last night I saw on TV was was said that’s going to be tight in HRM. Is that going to put a run on lower-priced houses, and are we going to see them perhaps increase because the demand will go up?

Clinton Wilkins
I think so. I think those prices are going to increase, as we know, this is a game of supply and demand, and I think this 600,000 and sub-600,000 price point already has a very high demand. And, if we’re going to be entering more borrowers and more buyers into this marketplace, it may drive these prices up, which is going to make it more prohibitive for some first-time home buyers to get into the market, period. I think we have a very balanced market here, and I do not think that first-time home buyers have as hard a challenge getting into the marketplace as they do in other areas of the country, like Ontario and BC. I think a lot of first time home buyers can get into the market right now, if you get a normal, high ratio insured mortgage, you need to come up with 5% down, whether that’s from your own resources, whether it’s from a gift, whether it’s from the Nova Scotia Down Payment Assistance Program, or you’re borrowing it from like a line of credit or something like that, then you can get whatever mortgage you really want from whatever lender. So, the difference between putting 5% down and putting 2% down and going with this more restrictive product, I don’t know if it’s going to be really as much of a game changer as people think. And sometimes, these little quick hits, as we know in the news, sometimes get people riled up, and it’s creating some demand in the marketplace. I can tell you, my phone was blowing up from Instagram and Tiktok and Facebook. There are a lot of people who are in the industry, like realtors and lawyers, who are posting information, and sometimes the information isn’t always correct. So I really would urge anybody who’s looking to buy a home, and they want to get a mortgage, to seek the advice of an unbiased mortgage professional. There are obviously a lot of nuances when it comes to mortgage lending. And when we’re looking at a file, we can decide, does it make sense for you to go through more of a traditional program, or does a credit union pilot program like this, that the Province of Nova Scotia is offering, make more sense for you? Because we need to weigh the pros and cons, right?

Dan Ahlstrand
I went on to the MLS site just to, just for out of curiosity, just to have a little look, take a look around. And I’m sure many people have been doing that over the last 24 hours, and I picked a property. It was just outside of HRM. It was $445,000 at 5% down, it was 20-some odd $1,000 when you plug in the 2% that drops to $9,00,0, plus the CMHC insurance fee was $17,000.

Clinton Wilkins
That gets capitalized. So there certainly is a cost with, and there’s gonna be pros and cons to both ways, Dan, and I think that’s what we really have to take into consideration. Is 2% better than putting down 5% there’s gonna be there’s obviously the insurance cost we have to look at and then there’s the increased borrowing cost potentially with the credit union that you need to look at, and it being more restrictive, you’re going to be in this home for a long time before you’re going to be able to a move the mortgage, or B, potentially even sell. So I think anytime that you’re doing any transaction, you need to look at what the do the options look like, and what is your best path forward. And this is going to work for some borrowers. It’s not going to work for all. And I would say, and I would venture to guess, the popularity in more rural areas, in Nova Scotia, is increasing.

Dan Ahlstrand
I think outside of HRM, that number is, does it work better for the market there?

Clinton Wilkins
I think outside HRM, outside of hands, I think there’s going to be an increased popularity in this program. And I think those rural communities sometimes are better served by credit unions. There aren’t a lot of bank lenders. There might not be a lot of mortgage brokers, but the borrowers that are here in HRM, I think 5% isn’t that restrictive, especially for the people that are buying a home. And let’s be frank, if you don’t have that 5% to put down on a home, what happens if something happens to your roof? What happens if something else happens to your home? Still have to pass the stress test, too, right? You still need to. And as I said, the rate for a credit union typically is one or 2% higher than it is with a normal bank lender, plus then 2% to be able to qualify. So that $200,000 price point normally, like, I think, with a bank lender, you can qualify for, up to maybe an $800,000 mortgage. But maybe with this higher rate, maybe 570 is what you can qualify for, if you have $200,000 for the income. Obviously, your debts are also factored into this and into your qualifying.

Dan Ahlstrand
I know it’s only been like a day and with the devil’s always in the details, of course, but on first brush, is this program better for first-time homebuyers? Or was it the or is the because I think it still exists. Is the down payment program a better option for first-time home buyers? Your opinion?

Clinton Wilkins
I think the down payment assistance program is better. It was interest-free. It gives the borrower more options when it comes to actually getting a mortgage. With this new program. I think a borrower with a lower credit profile can likely qualify, and that gives me even more kind of concern, especially with such a low amount of skin in the game.

Dan Ahlstrand
I think it said on the release, 630 or 620. That’s a very low barrier to entry.

Clinton Wilkins
Could a borrower with a 630 credit score qualify for 5% down on a flex down in the Nova Scotia down payment assistance program? I don’t think so.

Dan Ahlstrand
Clinton, we’re at the time, of course, this coming up weekend, we’ll have the latest edition of Mortgage 101, and I’m sure we’ll probably talk about this.

Clinton Wilkins
I’m sure this is going to be a hot, hot button topic here for our weekend show. So I’m sure our borrowers will want to tune in. We’re talking about loving your home. So maybe you want to improve your home. Or what happens when love goes wrong.

Dan Ahlstrand
Appreciate it, man. We’ll talk to you soon. That is Clinton Wilkins. You can find him on his website, and you can listen to him here on the station on Mortgage 10 this coming weekend. And of course, all the back episodes are available at halifax.citynews.ca.