Mortgage 101 – Location, Location, Location

So the interest rates are down, and I can finally buy a home – now where do I buy? Clinton and Todd discuss the Halifax housing market and deciding on a location in terms of housing types, commuting and fuel costs, natural disasters, insurance, and the potential for lenders to refuse mortgages in high-risk areas.

Todd Veinotte
Affordable housing, though. I mean, what is affordable?

Clinton Wilkins
You know, I’m not even that concerned about building affordable housing. I’ll tell you the reason why I think that if we have more supply, it will drive the price down. And I think if we’re even bought building homes that are at the top of the marketplace, people will then fill up those homes, and the less expensive homes will become available. Yeah, you know, it will be like a cyclone or whatever, it will suck up and leave the starter homes available for people. I think at the beginning of the marketplace, I think that is going to happen.

Todd Veinotte
Yeah, there are communities like Enfield and out beyond that. It’s amazing how much residential is surrounding Halifax.

Clinton Wilkins
If you go off of some of those exits, you would be shocked. Fall River, with just the huge amount of homes that are out there, you know, for me, I find that a bit far to live and work downtown, but it works for a lot of people, and they do it. The cost of fuel is a consideration, the cost of transportation. That’s not for everyone. I think when you are looking at a home, it’s location, location, location. You can always change the home. It’s more challenging to change the location because that involves selling and buying anything possible. But I always like to tell people, you know, the location is the most important thing you can buy. You know, the worst home on the best street. And usually, you’ll make it okay.

Todd Veinotte
People coming from Toronto, Ottawa, and places like that, buying is that tailed off?

Clinton Wilkins
I think it is. Has gone down quite a bit from what we were seeing in 2020 2021, and 2022, we’re not seeing the people come from Ontario. I think, firstly, I don’t think employers are just like, carte blanche, letting their employees work from home forever. I don’t think that’s happening. I think more and more even we hear government agencies like they’re going back to work, if not full time, they’re back two days, three days, four days, back in the office. You know, we need people back downtown. We need these people driving, you know, economies in at the cores of our country. We have some so beautiful cities in Canada and really underutilized, I think right now, because a lot of people are just, are not they haven’t returned, not yet.

Todd Veinotte
So some considerations that I think people need to, need to have in mind when purchasing is obviously, look this wildfire thing that happened in Halifax and this concern about allows, even services, right? City Water and all I mean, these are things that I think good realtors and people should be aware of, right?

Clinton Wilkins
These are things to think about that people I don’t think even cross their mind when they’re out shopping for a home. I think the number one thing people look at is price, and I think the number one, number two is probably the amount of bedrooms and bathrooms. Then they start looking at finishes. We’re not thinking about as much, maybe the location, or what your commute looks like? What are the operating expenses of that home? How much is the property tax going to be? Insurance?

Todd Veinotte
Are there any concerns about insurance, or heating costs?

Clinton Wilkins
Is there any deferred maintenance? These are all the things that go through my mind, but I’m looking I’m thinking about dollars and cents every day, right? It’s not so emotional for me, but I think when you’re buying a home, these are the things that sometimes get overlooked. You know, I think people could have a smoother transition into homeownership and probably better for their budget if they think about a few of these things going into it.

Todd Veinotte
Yeah, like floodplains. We know what happened, of course, with the Sackville River, not last year again and a lot of these homes now people are saying they’re unsellable.

Clinton Wilkins
And you know, just even the concerns with insurance after a claim, are you able to get insurance again? Sure, that can certainly be a problem. And you know, there certainly are areas that are going to become more and more prone to some of these natural disasters just due to their geography and the topography of this of their lot, for example, it’s certainly something to think about, and I don’t think it should be something that people just take very lightly. And you know, coming back to the floods and the fires some mortgage lenders paused funding mortgages for people who were either refinancing, renewing or buying a home in some of these areas, and they also required an additional appraisal of the property to, you know, just confirm that the property was not impacted by any of these things that put a bad taste in some borrowers mouths, I’ll be honest with you. So what’s that put a bad taste in my mouth, too, as a mortgage broker, right? But I do understand why the lenders try to protect themselves, but they’re also trying to protect the borrower, sometimes from themselves. You know what I mean? They want to make sure that the property wasn’t.

Todd Veinotte
So if I have a home in one of these flood plains and my lender says we don’t want to renew your mortgage, what do you do have to sell it?

Clinton Wilkins
You might have to sell or maybe you have to refinance. That would be very rare. Todd, I’ve not seen a situation where a lender’s like, hey, you need to pay out your mortgage because you’re in a floodplain. Usually, it’s something like, you need to pay out your mortgage because you’re not making your mortgage payments on time. Or we’re no longer renewing mortgages. Maybe we’re exiting the marketplace, there are various reasons why a lender may not want to renew someone. I don’t think it being in a flood plain would be one of them. What might happen is, if your insurance company no longer wants to insure you and you can’t get home insurance, then, yeah, the lender wants to be paid out. After all, they want to make sure they’re protected and that they’re the first loss payee on that insurance that I would say would be a lot more probable in terms of a situation where the lender would be like, Hey, we have to call this mortgage because you don’t have home insurance anymore. But I think you would always get insurance. It’s just, how costly is that insurance going to be? You can always insure on insure and insure. Just the more risky it’s going to be, the more costly that insurance is going to be.

Todd Veinotte
Well, when you’ve got some insurers who are tapping out of a certain market…

Clinton Wilkins
There are insurance companies that have exited insuring in Nova Scotia, or certain areas of Nova Scotia just due to the risk. Yeah, that has happened, yeah.

Todd Veinotte
What about coastal properties? Because we know. And again, this is the show. Is not political, not political, but like, erosion, the Coastal Protection act in which the which the Houston government has walked away from would have impacted a lot of development. So what advice do you give people if they’re looking at a property along the coast?

Clinton Wilkins
I think sometimes it’s Buyer beware. The ocean is a very powerful beast, and the climate is changing here in Nova Scotia. Do I think this is going to be Florida? Probably not in our lifetime, but the weather is different now than it was 20 years ago, 30 years ago, or 40 years ago, you can visibly see the changes in our environment here in Nova Scotia that are having an impact on the ocean, and it’s having an impact on the coastline. So if you’re building or buying a home on the coast, you want to make sure that house is going to be good for the next 40 years, right? Ish, yeah, you know, at least, it’d be great if it’d be great good for 100 years. I mean, that’s not realistic to maybe predict, but you want to make sure that you have 40 years of runway, especially if you’re getting a mortgage. You don’t want to be paying a mortgage for 25 years, and then suddenly your house is no good anymore, right? You want to make sure that there is some runway. The lender also wants to make sure there’s some runway. So when we get an appraisal of the property, you. It has on there the estimated economic remaining life of that property, and that always needs to be longer than the length of the mortgage. So if that property is pretty run down, the economic life might not be long. That means, if the lender even lets you do it, it might mean that the amortization needs to be very short.

Todd Veinotte
Well, and again, the market is changing, but these are things that have always happened, right? The market’s always cyclical. These things always the history repeats itself.

Clinton Wilkins
History does repeat itself, just like rates, just like politics just like the real estate market, it all shifts, and that pendulum does swing from one end to the other. Ideally, we want the pendulum to be somewhere in the middle. We don’t want it to be super super liberal. We probably don’t want it to be super super conservative. We want it to be somewhere in the middle. And that’s the challenge. It’s tough to find where is that middle, because I think the middle is moving, and there’s other, there’s a lot of forces at play here, political, economic and, you know, the environment, there’s a lot of pressures that are impacting borrowers, and obviously policies and things that are going to impact things down the road.

Todd Veinotte
And, of course, first-time buyers. There are a lot of people out there who feel discouraged because they can’t get into a house.

Clinton Wilkins
I think they were excited when we came back and said, hey, the 30-year amortization is coming back, and it’s launched. Many lenders have launched, not every lender, but many lenders have launched their 30-year amortization for first-time homebuyers that buy newly constructed properties, and this is only for first-time homebuyers. I think it’s a great program. I would personally take advantage of it myself if I was a first-time homebuyer and buying a new construction property. But there’s not enough new construction here in Halifax yet. I think there’s going to be a lot more construction to come, but it’s going to be a while before we get the amount of supply available that’s going to meet the needs of a first-time homebuyer. A lot of the new construction that we’re doing, these are not entry-level homes, even condos. You know, these are not for entry-level buyers. Most of them.

Todd Veinotte
I mean, the Canadian Center for Policy Alternatives released a report on on affordability in Nova Scotia, and what they say is two people with two kids need to make both people need to make 28 bucks an hour over 35 hours a week. And that’s like, that’s over $100,000

Clinton Wilkins
a year combined. Yeah, that would be like 110 100, right? Well, something

Todd Veinotte
like that. And many people are so far outside of that bubble, working people, that there is I get why people are discouraged, is what I’m saying.

Clinton Wilkins
I do too, and it is frustrating. The incomes have not paced at the same level, the cost of house against pace. Part of that is supply and demand, and part of it is the cost of borrowing. Yeah, you know, there’s a couple of couple layers here at play. The incomes will continue to increase, but our incomes here always lag the rest of the country.

Todd Veinotte
They always have, yeah, but our expenses don’t at this point.

Clinton Wilkins
When you think it used to be a good place where it was, you know, affordable. I think, let’s be honest, Todd, our housing is very affordable. Yeah, our listeners may not agree with me. It is very, very affordable. And we’ll talk about that a little bit more when we come back.

Todd Veinotte
Okay, that all said Mortgage 101 your guide to homeownership will be right back.