News Update: News Radio 95.7 – October 10th

Clinton Wilkins joins Dan Ahlstrand to comment on the federal government’s new housing measures, including changes to mortgage refinancing rules to incentivize homeowners to add secondary suites.

Starting January 15, homeowners can refinance up to 90% of their property value, with a maximum of $60,000 for adding a secondary suite

Dan Ahlstrand
I don’t know if you saw this earlier this week, but there’s been a change. The federal government, introducing a number of measures related to housing earlier this week, which included measures for homeowners wanting to add a secondary suite, taxing vacant land and building homes in place of underused federal properties. Now, the first action, according to this CTV website, is changes on how lenders and insurance companies can offer mortgage refinancing for homeowners looking to convert an unused basement or garage into a rental suite. When I hear the word mortgage, my brain immediately switches to the host of Mortgage 101. And, of course, the person for which Team Clinton is named after, and that is Clinton, Wilkins.

Clinton Wilkins
Thanks for having me, Dan. How’s your day going?

Dan Ahlstrand
Not too bad. Tell me how it works now, if before these rule changes, Clinton, if I wanted to build a rental unit in my basement or in the garage or in maybe another piece of property I’ve had, how did the mortgage rules work for that? Or could you even get one?

Clinton Wilkins
You could still refinance your home up to 80% of the market value. Many lenders will only allow you to refinance up to 80% of the as is. Now, as you can imagine, if you’re adding a secondary suite, hopefully, the value of your home will increase, but people were really having a hard time financing those properties. And just think maybe you bought a house five years ago, for example, luckily, in Halifax, our values have really gone up over the last five years, but it’s not the same in every area of the country, and we certainly need housing here. We need 10s of 1000s of housing units across the country, and they really want to incentivize homeowners to create more housing units. So I think this is going to be positive, and it’s the first time, and there were some previous rules that were announced here just a few weeks ago, but with this liberal government, it’s the first time that the rules have basically become more liberal. They weren’t tightened under the previous administration. So I think the pendulum is swinging now, kind of from the right, into a more central position. And I think it’s going to be positive for existing homeowners. They will be able to now refinance their homes starting January 15. They’ll be able to refinance up to 90% of the property value, and take into account adding a secondary suite, up to a $60,000 amount.

Dan Ahlstrand
So the changes, and I understand that that’s gone up to what 90%, you can finance this over 30 years, right?

Clinton Wilkins
Exactly so high ratio, CMHC, Sagen and Canada Guaranty mortgages, as of right now, we’re only for people to buy a home. You couldn’t get that type of insurance in a refinance. A refinance could only be done conventionally, which means that you could only refinance up to 80% of the value of your home. So going up to 90% will move the needle, especially here in Halifax. Think our average house price is about $500,000 So to go from 80% to 90% that would really mean that a borrower could borrow, potentially an extra $50,000 in a refinance situation to add that secondary suite, and that might be the amount that is needed to actually make the project work or not. So I think it’s going to be positive.

Dan Ahlstrand
And then you use the the rent that you would generate off of that suite to help y or defer that mortgage cost.

Clinton Wilkins
Yeah, or maybe you’re going to do that for family, Dan, and I mean, they could help out with some expenses and things like that. I think it’s positive all around and I think here in Halifax, the municipality certainly has become more favorable to secondary suites. I remember even 10 years ago, it was really challenging to even do an in-law suite, or what we would consider a granny suite, just the regulations were very tough. So I think that’s become more liberal now, and I think that we’re going to see a lot more people do secondary suites, maybe in their basement, or do laneway suites. You know, I think the thing that’s going to shift. You know, maybe you have, a backyard, or maybe you have a driveway where you can extend your property, or maybe it’s a second structure that you can maybe potentially do on a slap. We’re seeing more of these happening, and lenders weren’t so apt to really liking these laneway suites. So I think this is going to incentivize lenders, like the big five that we do business with every day, and other mortgage lenders to be able to lend the money to do this type of project. I think likely this will be a single advanced project. So people will likely, get their mortgage approval, have their contractor set up. I think the contractor will do all the work, and then the money will be advanced in a single advance. That’s what I think will likely happen. And I think that contractors here are going to probably make some projects specifically around this program. Certainly, some contractors have already reached out to us for some information and advice, and I think they’re working on some things. So I think we’ll likely see some construction companies hopefully open and specialize in this type of work.

Dan Ahlstrand
This could be a game changer, right? If we’re building not just the typical granny suite in the basement, but a secondary structure, then that might, people may be more apt to do that.

Clinton Wilkins
I think people may be more up to do it for sure. And, you know, I think that that $60,000 price point, construction is getting more expensive. But I think if you’re doing something on a small scale, $60,000 goes goes a long way. And if $60,000 can create an additional housing unit, I’m all for it, especially taking into consideration that these borrowers will have 30 years to pay those funds back.

Dan Ahlstrand
Last time you and I chatted, it was right after the Bank of Canada made a decision to lower interest rates, you said that that was probably going to start to spark a little bit more business in the market. Is that being realized? Are you seeing that? Are you seeing more people approaching you for mortgages now that the interest rates are dropping?

Clinton Wilkins
I will tell you that October has been wild. Dan, you know, certainly we are open for business, as I’m sure brokers are across our city and province. Certainly, very, very busy. I think the rates have made a shift, but I think a lot of people were sitting on the sidelines, and I think first time homebuyers are now getting some more accepted offers, which I think is great. And I think the people that are able to qualify right now are choosing to enter the market, because I think if the rates are going to go down more, we’re going to see the price of real estate increase, you know, until we really get a lot more supply on board. But I think it’s going to be years before we see the supply issue corrected. So it’s certainly very, very busy. And I will say for October, it’s been the busiest month that we’ve had all year.

Busy Market and Interest Rates

Dan Ahlstrand
How is the market? How is the the real estate market? Is it? Is it really tight and, a bit of a hunger games out there?

Clinton Wilkins
I think it’s more balanced than it was. Dan, you know, I don’t think we’re seeing that situation. And I’m not hearing from realtors that they’re getting, you know, 20 offers on a property that they were seeing back in covid days. And I think that buyers and sellers are negotiating a little bit more, which is healthy. Ideally, we want to have a balanced market. I do still think that it’s still a seller’s market. There’s more demand in the market than there is supply, so I think the sellers probably still have a leg up. But I do think it’s going to become more heated as the rates continue to decrease. Now the Bank of Canada’s media again on October 23 so in less than two weeks, we’re going to see what happens here. I’m optimistic that we’re going to still continue to see these rates soften, and the Bank of Canada will be meeting again in December. So I think we’re still on a downward trajectory. And you know, rates are going to continue going down for the next several months and years. I would be optimistic to say 50 basis points. You know that that’s what happened in the US. Now, the one rationale in you typically in the US, they need to lower double the amount that we would need to lower to have the same effect. We’re closely watching inflation. We’re closely watching the job numbers. And you know, I’m optimistic that we’re going to still see things go down more. I think we’re going to see a jumbo decrease of 50 basis points, whether it’s in October, December or early next year. I think we’re going to see some decreases in that 50 basis point amount. So I’m certainly eagerly watching, listening to what economists are saying every day, and I will be here on the station with Rob Snow on the day the Bank of Canada meets on October 23 so I encourage our listeners to obviously stay tuned, and if they ever need any information, really reach out to an unbiased mortgage professional. There’s so many things changing, and there’s so many things going on in the media, and I think some misconceptions out there. So everybody’s situation is different. You know, it’s important to get some expert advice.

Dan Ahlstrand
Clinton, I appreciate your time.