Mortgage 101 – Lean On Your Lenders | July 3, 2023

In this edition of Mortgage 101, Clinton Wilkins and Todd Vienotte are discussing the impacts of the recent Nova Scotia wildfires. They talk about what to do when you lose your home, how to work with your insurance, guaranteed rebuild and the importance of asking for help.

Todd Veinotte 00:04
We had a, obviously a really rough few weeks here in the province, Clinton with these wildfires…

Clinton Wilkins 00:12
Devastating.

Todd Veinotte 00:12
Devastating and impacted so many people. But we’ll kind of focus on not to – Barrington Lake and Shelburne County, certainly they’ve had lots of challenges down there with some properties. But what happened in Hammonds plains, and Upper Tantallon. I mean, this was, with people’s homes, just unbelievable. First and foremost, our condolences, and to anybody who went through that, right or going through that.

Clinton Wilkins 00:13
And you know what? Our listeners have been impacted, my clients have been impacted. It’s challenging to go through hard times. And it seems like we’ve had so many hard times here over the last couple of years. But you know what? This has certainly been a major impact. And people in this area, you know, there’s gonna be people that are going to be impacted now for years because of this.

First steps for when you lose your home

Todd Veinotte 00:54
Ok, so if you had to, I don’t want to say itemize. But, but what are some of the biggest challenges for people who are having this lived experience right now? Having their house burned down, with a mortgage? What are some of the biggest thing…

Clinton Wilkins 01:08
Because there, there were several.

Todd Veinotte 01:09
There would be several, right? So what’s your advice piece, I guess, to start for these people?

Clinton Wilkins 01:14
So I think the first step is you need to contact your mortgage lender, and many mortgage lenders will give you a deferral while you’re trying to sort things out with insurance. So I think that’s the first thing you need to do. Sagen, which is one of the three mortgage insurers in Canada, there’s a Canadian Mortgage Housing Corporation, Sagen and Canada Guaranty. Sagen was the first one that came out to say, if you had a Sagen insured mortgage, we will offer you a deferral, we will work with your lender to ensure you get six months, okay? Because it’s going to take time just to sort things out with the insurance. And I think many homeowners want to rebuild Todd. Rebuilding is going to be a very long process. It’s going to take a couple years probably to get some rebuilding going well, and where are people going to live? That’s my number one question. Because we have apartment vacancy at like 1%…

Todd Veinotte 02:03
You can get an advance in the insurance, you just call them and…? Less than 1%.

Clinton Wilkins 02:04
…less than 1%. And we know what’s going on with the real estate market right now. Like what I said, there’s not a lot of homes for sale. Even if you just take your insurance money and say, “Hey, I’m gonna go buy a new home.” There’s not that many homes to buy. Even in that area, there’s not a lot. Okay, so I think that’s something to think about. We also need to be very, very cognizant, some of these people that have been impacted by the wildfires have been displaced, and maybe have lost their homes, some of these people are in financial hardship, like I’ve heard stories of people that like have $500 to their name. So you need to talk to your insurance company, and maybe get an advance on your insurance. I would talk to them, you know, these insurance companies are wanting to wrap their arms around their insurer to make sure that they’re going to be okay.

Todd Veinotte 02:51
Will that come off the potential principle?

Clinton Wilkins 02:53
Yeah, of course, of course. And it’s very common for people that have insurance claims to get paid all along the process. So you’re not going to wait just to the end to get one big, fat check at the end and be done. That’s not the way it’s going to work. And no one wins with insurance, nobody wins. Insurance is one of those things that you hope you never need to have. But certainly people really need it right now. One, you need to think about your immediate housing situation. Obviously, some people were living in shelters for like 10, 12, 14 days. This has been going on for a couple of weeks. Some people were living with friends or family. But that’s not necessarily a long term solution, you need to figure out where you’re going to be safe for the next several months likely. These people that are in financial hardship, sometimes people have had credit issues. So you know, that might be challenging. If you were to need to get a new mortgage, maybe you’re gonna get insurance, but you maybe need to get a new mortgage to build this house, that might be tough. Maybe you just don’t have time to find alternative housing, and live somewhere for a couple of years and get a new house built. As you know, the cost of construction is very, very high. One of the concerns that I have: some people are underinsured. Because of the cost of construction, that’s obviously gone up, and because of the cost of real estate, some people didn’t adjust their insurance. If you didn’t have guaranteed rebuild coverage within your insurance. Sometimes people only had insurance for maybe half of what it would cost to rebuild now at this point.

Working with your insurance and guaranteed rebuild

Todd Vienotte 04:24
So let’s differentiate what’s guaranteed rebuild? Is that a rider?

Clinton Wilkins 04:28
So normally, what happens with insurance is there’s a building coverage limit, which means if your home burns down, you will have this much coverage. When you have a mortgage, you have to have at least that much coverage. Or you need to have guaranteed rebuild. Yes, it’s a rider. It’s a line that’s going to be in your insurance. Not everybody has this. Your building limit can be low if you have guaranteed rebuild, because then you’ll have enough money available from the insurance company to build to what you had. Not every insurance company works like that. And some people really work off the building limit. So if the building limit was too low, that’s the insurance money that you’re going to have to work with to build a new home. And maybe you won’t have enough. We’ve talked to customers, we have clients that are in these impacted areas. Some clients, and we’re talking this, these are very early days, a lot is going to change. We have some clients who are planning on taking the insurance payout, paying off their mortgage, – because obviously, that’s the first thing you need to pay out – selling their lot…right? Then they’re gonna have, you know, the proceeds from the sale of the lot, and then using the difference between their insurance and their lot sale, to then go and buy another house. Because they don’t want to wait the two years. It’s not just one home that needs to be rebuilt here. It’s a community that needs to be rebuilt. And yes, builders are going to, to help they’re all going to get on board. But we can’t build homes fast enough already. That’s the big challenge.

Todd Veinotte 05:59
Alright. But kind of coming out of this. And I’m a little confused here is equity in houses is always built on speculation, right? You speculate what the house would sell for you don’t know that. So how do you how do you differentiate, delineate between that, and getting a buyout, and then going and buying a new home, I guess, is what I mean.

Clinton Wilkins 06:23
I think that’s a hard calculation to land on. So I think you really need to decide what your avenue is going to be. And you need to talk to your insurance company. And I think leaning on people like us, like, you know, I may not be involved in insurance, and I might not be involved in selling real estate. But we’re involved in every little component, because obviously, the mortgage is kind of the biggest piece of sometimes these transactions. So we talk to a lot of people and, you know, I think we have a good kind of unbiased perspective, that way. People’s strategy to move forward from this disaster are going to be different. And I think that’s okay. And I think HRM is going to Halifax Regional Municipality is going to make some changes, you know, some of the challenges with these wildfires is this community didn’t have water, you know what I mean? They had to truck the water in to fight these fires, which, you know, I put my hat’s off to first responders. A lot of our clients are first responders. And I can tell you, they worked tirelessly to get this under control. And you know, I think the whole city, you know, kind of banded together. You know, there were so many fundraisers, I went to a fundraiser on the weekend at the Scotiabank center. Amazing. It was in, they organized it in seven days, and it was packed, you would have thought it was Shanaya Twain, that just happened on Monday. It was packed, local talent raised, I think $330,000 that night for disaster relief. And I think by that point between what had been raised prior, and the money that was raised on that night, they raised like $1.3 million dollars. That’s enough to, you know, scratch the surface to help people with immediate needs today. But that’s not rebuilding people’s homes, you know, as you can imagine, so, if you own a home, you really just need to maybe let the dust settle and decide what the best way forward is for you. Because you can rebuild. You can take the insurance, but you need to figure out what is going to be the easiest path of your life. And I think some people will take the insurance buy out, and then sell the lot, I think that will happen. It might be a faster way into another home than doing the construction, the construction is going to take time. So there’s no obligation for it because the deeds associated with that property or you’re not tied in contractually in some way as a result of your insurance. Well, I think everybody’s insurance is different. I think a lot of people’s insurance will allow them to take a buyout.

Lean on your insurance and your lender

Todd Veinotte 08:52
A buyout; and that would mean that they can vacate that property.

Clinton Wilkins 08:57
Yeah. So what would happen if you take a buyout, the first thing that needs to be paid out would be your mortgage, right? And then you would technically own the land.

Todd Veinotte 09:05
So you would own the land still?

Clinton Wilkins 09:06
And then you could sell sell it, sell the land. And then you would have the difference between what you buy it is and why you have to pay your mortgage off. But then, of course, you need to, you know, qualify for a new mortgage, you need to find a new home to buy. Right? So, you know, there are so many different issues at play here. And I’ll just bring it all back to like where we are right now. People need a safe and secure place to live. And they need to think about the short term, but we also need to start thinking about the long term and what the outcome is going to look like.

Todd Veinotte 09:37
Okay, so potentially, if somebody could be two years, you’re going to learn and let’s say that you don’t have the income that you would like to have, or let’s suggest…

Clinton Wilkins 09:45
Or maybe your situation has changed…

Todd Veinotte 09:46
Or whatever is changed, who knows what’s going on? And you’re looking at and you’re saying, I need a place to live and let’s say you’re lucky enough to find a place to live and you’re paying rent, you still have to make that mortgage payment, and then you’re waiting out the mortgage payment. And you’re starting to take the odd payment. And you’re eating into that in that principle that you would have had this could put, and I don’t want to be doom and gloom here, I want to be as optimistic as I can, but we also want to be as realistic as we need to be, to do the show and in the way that we’re responsible way that we want. What advice you give people who find themselves in that kind of worst case scenario that I’m just describing.

Clinton Wilkins 10:22
I think that if you’re in the worst case scenario, you need to ask for help. First, ask for help from your insurance company. Second, ask for help from your mortgage lender, they are going to know where to go, what resources are available, and to start working with your insurer and your mortgage lender, you know, around deferrals around getting the insurance claims going and things like that.

Focus on what is most important; secure your documents

Todd Veinotte 10:44
Alright, so some lessons, what are some key lessons that people can take away from this?

Clinton Wilkins 10:48
You know, I’ve heard from so many customers that have been impacted. Some of them were out at Costco, for example, and the situation happened and they couldn’t go back to their home. Right. So obviously, some people’s pets lost their lives, some of them were able to go in, you know, rescue their pets and stuff like that. So I think that is very sad as well. Because as we know, pets are like family. And, you know, that certainly is not a great situation. I think knowing where your documents are and having your documents in a safe spot. That’s important. You know, it’s very tough to replace things like credit cards and, and passports and birth certificates and things like that. So if you have a go bag or something like that, if you need to go no know where that is. And, you know, everything else really is replaceable. Yes, there, there are personal effects that, you know, get lost and destroyed when someone loses their home. And that’s sad. But, you know, I think as long as you as a person are okay, and you’re secure. That’s really the number one number one thing I know, people that literally had like five minutes to get out. And, you know, they were you’re no, you’re just grabbing your key things, but if you don’t know where those things are, that’s tough. A lot of things are replaceable, though, you know, and what’s so amazing with this whole disaster is no lives were lost.

Todd Veinotte 12:08
Yes, or injuries.

Clinton Wilkins 12:09
Or, you know, I’m sure there were probably some injuries maybe from like firefighters and stuff like that, but like, this was a pretty big disaster to not have lost any lives, which I’m so proud of, you know, living in Halifax and being Nova Scotian and being Canadian, because you watch these shows, and people are like, I’m just holding out this is not going to impact me. But you know what, we listened and you know, we followed direction, and everyone got out safely so I you know, put my hat off to you as well.

Todd Veinotte 12:38
Yeah, and absolutely and for those listening who were impacted to hurts go to and we, we follow the advice that Clinton just talked about and get through it. You can get through it and reach out for help. Mortgage 101, your guide homeownership, we’ll be right back.

If you’ve liked what you’ve heard, and you want to learn more, feel free to visit us online at teamclinton.ca.