Mortgage 101 – Advice for Modern Buyers

Todd Veinotte and Clinton Wilkins discuss the impact of inflation and rising debt on home ownership.

Inflation and Its Impact on Mortgage Lending

Todd Veinotte
Welcome back to Mortgage 101, your guide to home ownership, with myself, Todd Veinotte and Clinton Wilkins, our mortgage guru, of course, and Clinton inflation. This is something that is on everybody’s mind, and inflation is like the Wild West, isn’t it? And of course with this we’d be remiss if we didn’t talk about these tariffs and the shadow that is hanging over everybody, right?

Clinton Wilkins
Inflation? What’s going on? Yeah, you know, the numbers are not great, and I think that’s the problem.

Todd Veinotte
You say the numbers you’re talking about, inflationary.

Clinton Wilkins
I don’t know where all the money’s coming from. Where are people getting money to spend on everything?

Todd Veinotte
Exactly. They’re borrowing and maxing out their credit.

Clinton Wilkins
Yeah, that’s what I think is happening. And Canadians are at an all-time high level of indebtedness. We’re so regulated in terms of mortgage lending, but why don’t we regulate the auto industry? Why don’t we regulate the banks in terms of unsecured lending? They can do whatever they want. It’s sometimes with very low or no verification.

Todd Veinotte
So are you on the applications for mortgages and this is when it all you knowing what the real deal is in people’s finances.

Clinton Wilkins
We’re pulling there. We’re scraping people’s credit bureaus. We know their high limits are. We know what their balances are. We know what their payments are, and for any revolving debts, we are making a payment of 3% which is what we’re putting in our ratios. So, for example, if someone owes $20,000 on a revolving facility, whether it’s a credit card or a line of credit, we’re putting in a payment of $600 a month. People might be paying interest only. It was only a couple of 100 bucks a month, but we’re putting in a payment of $600 so the more in debt people are, the higher those ratios on our end are going to be. So having less debt is usually a good thing. Overall installment debt, we use whatever the payment is for student loans. If there’s no payment, we’ll put in a lie, one or one and a half percent, just depending on what the situation is, what the lender is, and what their requirements are. But it may make a big, big difference. And a lot of people are in big, big debt.

Impact of Food Prices on Household Budgets

Todd Veinotte
Food prices. I mean, that is eating (pun intended). A huge chunk out of people’s budget. It’s hundreds, hundreds of dollars a week. A week, hundreds, that’s right, and doubled, if not more.

Clinton Wilkins
I know there are a lot of households that are spending more than $500 a week on food. Wow, that’s wild. That’s a mortgage payment just to feed a family.

Todd Veinotte
So let me ask you this because I’ve asked this question on the show, on my regular talk show, of course, and how much income do people need to have a $750,000 mortgage with two kids, or three kids? And all the expenses that would be incurred from a couple of vehicles. I mean, would 150 year cut the touch at it? I’m thinking like 200 plus.

Clinton Wilkins
I think they are a lot less than people expect. Yeah, and I see clients all day, every day, trust me, I see how much people make. There are a lot of people who are making a good income, but there are not that many households. We’re talking about smaller percentages that are making above 200 grand.

Todd Veinotte
But your business is growing exponentially.

Clinton Wilkins
It is, because a lot of the clients that we deal with every day, our average mortgage amount is like $400,000, right? We’re dealing with a lot of people whose mortgages are 300,000, a lot that are 500,000, a few that are 100,000, and a few that are a million plus. But like, the average consumer that we’re dealing with has a mortgage of like 400 grand. And those $400,000 mortgages, a lot of those people have household income more like 100,000, so maybe it’s two people that have a job at 50,000.

Todd Veinotte
Well, it’s funny because six years ago or something like that, those $400,000 mortgages would have been $200,000 mortgages. So again, everything’s doubled, which is amazing to me.

Clinton Wilkins
Not only has the debt doubled, but the real estate prices have doubled. So I think the debt and maybe the real estate prices, at least in Halifax, have paced on, but the incomes have not paced. That’s the challenge.

Todd Veinotte
I would think it’s disheartening for some people who would be listening right now and say my gosh, I’m on the outside looking in here. What do you say to that person because you’ve always advocated for don’t give up on the dream and take steps to get to where you want to be, right? You’ve always advocated for that.

Clinton Wilkins
I just fear that there were some people who we probably could have gotten approved. Five years ago that they waited, they waited, they sat on the fence. They missed their chance. I pushed you six years ago. You may not be in your dream home, but like, you have a nice place. You’ve renovated. It’s a great location.

Todd Veinotte
Fantastic location. And if not for you, and I mean this, I would not have done that. You pushed me. You said, Todd, now’s the time I was renting. You’re like, Why are you renting? Throw any money away. That’s right. So you and so. So the philosophy remains true today, right? It does 400,000 still today.

Clinton Wilkins
I don’t think it’s ever gonna be Toronto prices here. Like, don’t get me wrong, I don’t think that’s gonna happen, the average house price in Toronto is more than double. So there is room for us to probably continue to have our values go up. But I hope, for everyone’s sake, I know homeowners probably are not gonna like this. What I’m gonna say, I hope the prices start going up by 3% per year. That is more manageable for us to deal with. The double-digit increases. It’s too tough. It makes the market too unbalanced. Having a balanced market would be an ideal situation.

Balanced Market and Real Estate Trends

Todd Veinotte’s
How do you know when you’re in a balanced market?

Clinton Wilkins
I think when the listings sit for longer, when there’s more listings, I can tell you it’s still really rapid, really like it’s things are happening very quickly. Under 600,000 the I think above $600,000 range, we’re seeing a slower go. Yeah, I’m seeing the listings. I mean, that’s positive, but I’m seeing these listings sit on MLS for longer than they were.

Todd Veinotte
So here’s the challenges that people, they may be enticed to say, look, I can get 600 grand for my house and make a lot of money, but they still need a place to live, right? You sell high, you’re gonna have to buy, right? And that’s, that’s the challenge with this market. If you want to sell and buy, you’re going to be buying high as well.

Clinton Wilkins
And you know, our rental market has not softened even though we’ve had a ton, a ton, a ton of rentals come online, and there’s more and more rentals coming online every day. I counted the other day, there are over 10 cranes in the sky that I can see from my condo, wild, and a lot of these apartments, and there are some condos, they’re coming online like straight away, and it’s relieving some of the demand, and it’s helping to be more balanced. And I think we’re in a more balanced market than we have been in the last five years, which I’m pretty happy about. But I think sometimes the sellers and sometimes the buyers are still a little bit dull.

Todd Veinotte
Explain what you mean by that.

Clinton Wilkins
They think that it’s five years ago or they think they’re going to get something that’s unrealistic and or they think they’ll think it’s a seller’s market.

Budgeting Strategies

Todd Veinotte
Conversely, they’ll think everybody always thinks their house is worth a lot more than it is, too.

Clinton Wilkins
It’s true. And I see it, even people coming in to see me, they’re like my house is worth this. We get an appraisal. Usually it’s about the same. And oftentimes we’re using the assessment value as the value. Yeah, appraisals usually come in more than the assessment, like what I said, the assessment’s pace from two years ago, okay, but the values haven’t gone up that much in the last two years. So I think hopefully people are coming a little bit more down to earth. And I know Dulu sounds funny, but I’m sure if you’re listening to social media, you’re over my head. You went over well, did Labubus? You know, there are lots of funny terms that.

Todd Veinotte
I’m not going to pretend to be in touch with the happenings on social media. I’m not even probably some of our listeners know, though, that’s right, they’re probably thinking like, Todd, you’re showing your age right now.

Clinton Wilkins
Oh no, you’re still a young man.

Todd Veinotte
Our producers love. I’ve been accused of being a baby boomer. I’m not a baby boomer. Baby Boomers were 64 parents who were boomers. Well, no, my parents were not boomers. I was born in 1969 so I’m in the I’m on the shadows of the boomers. I hate a boomer baby, so don’t accuse me of being a boomer. I hate when people do that. I get that all the time.

Clinton Wilkins
There were no babies to boom.

Todd Veinotte
So the bottom line is, look, yes, it’s expensive, and it’s more expensive than it’s ever been.

Clinton Wilkins
And how are people getting by? People need to focus more on their needs than their wants, and inflation would be more under control. I think that we still are a little bit delusional. I’ll use the real word this time around. There’s not an endless amount of credit. Their house prices are not going to keep going up, so they can refinance and get that debt cleaned up. You know, I think people need to have a budget. They need to stick to it, and they know. They need to know how they’re going to operate. So I think, you know, between now and the end of the year, people are a little bit food loose and fancy free, at least they are in the summer, maybe in September, people will get back to school and back to reality. Right, and start opening their mail again, right? And then we’re going to talk a lot more about refinancing later in the show.

Todd Veinotte
Mortgage 101 your guide to home ownership. We will be right back.