Mortgage 101 – loving your home | February 2021

In Season 3, Episode 2, of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on News 95.7, the guys talk about loving your home, refinancing, and properties with secondary suites.

Mortgage 101 with Clinton Wilkins & Todd Veinotte – February 2021

Don’t feel like listening to the podcast? Check out the transcript below.

Transcript:

Welcome back to Mortgage 101!

Todd Veinotte: [00:00:21.25] Alright, it’s Mortgage 101 with myself, Todd Veinotte and Clinton Wilkins, Mortgage 101 Your Guide to Homeownership, I should say, and Clinton Wilkins is the one and only joining me here.

Clinton Wilkins: [00:00:32.62] I mean, you know, one and only. And we’re back.

Todd Veinotte: [00:00:35.77] I know we’re back. This is the second one. Seems like a long time since the last one that we’ve done.

Clinton Wilkins: [00:00:41.05] I think when a month goes by and, you know, we’re just seeing each other so much these days. You know, and, for me, I love being back. And I think that this is a great format. And we got some really good feedback. When we were on in January. So hopefully we have lots of listeners here on News 95.7. And hopefully we’ll have a really great show today.

Todd Veinotte: [00:01:02.38] Yeah, we’re happy to be back on News 95.7. Again, we’re going to be doing this all year long, of course, once a month. And it is February, it’s the month of love. So the theme of this is:

Clinton Wilkins: [00:01:12.16] Love your home.

Todd Veinotte: [00:01:13.27] Love your home. Do you think most people love their home?

Clinton Wilkins: [00:01:15.04] I think a lot of people love their home and I think Canadians love homeownership. And, you know, that’s really what we’re talking about today during the show. And, you know, I think when we’re talking about things like love your home, it’s how can you love your existing home more? And maybe that is renovations. Maybe that’s improvements. I don’t know. Or maybe it’s, you know, love it or list it. Maybe you’re going to list your existing home and buy a new home. So these are certainly things we’re going to talk about today. And I think February is a great time, especially we’re getting into that spring market. And, you know, spring can be one of the busiest real estate markets of the entire year so.

What are you seeing in the market during COVID?

Todd Veinotte: [00:01:51.52] Okay, so obviously we’re in difficult times, and might not be the right, yeah, I think difficult is the right term. Trying times, certainly challenging times with COVID. What’s an update, I guess, on from what you’re hearing about COVID in inventory and the market in general, what can you tell people what you’re hearing?

Clinton Wilkins: [00:02:10.42] Well, I think it’s still red hot in Halifax. I think the prices definitely are up and there’s still lots of demand. You know, the apartment rentals right now, the stats came out and it’s at 1.9 per cent vacancy, which is very, very low. And, you know, there’s still lots of demand in the housing market in terms of home purchases as well. We have lots and lots of people who are pre-approved. But the challenge is there’s only so much inventory out there for people to buy. And the prices are up, Todd. You know, and I think that is just a recipe of how many buyers there are in the market and the limited amount of sellers that are willing to sell their existing homes.

Todd Veinotte: [00:02:50.74] Okay, so you talk about loving your home. I think that it’s, if you have the right financial situation, the right mortgage, if you do it right it’s easier to love your home than if you don’t right?

Clinton Wilkins: [00:03:01.48] Well, nobody wants to sit in a home that they love, but they can’t furnish it and you’re eating Kraft Dinner. That’s not really a great situation for anyone. So I think that getting that financial advice and make sure that, you know, you can afford the home that you love, I think is super important. And, you know, I think more than ever, it’s important to seek the device of an unbiased, mortgage professional like us, because there’s so many variances out there and so many different offerings. And, you know, we’re here for the long run, really. We’re building that relationship with the client. And that’s what we’re biased to. And, you know, we’re really able to go to bat for them.

Todd Veinotte: [00:03:35.17] So when you have new people coming in the door and what, I don’t know what per cent, but what type of numbers are you seeing of people who just are not in a good financial situation, not necessarily with credit or anything like that, but concerning what they’re in with their mortgage and how you can improve that with consolidating debt or whatever, refinancing, whatever. How often do you see that?

Clinton Wilkins: [00:03:59.68] You know, we see that all the time. And I think that, you know, 2020 was a challenging year for a lot of people just with the fact that, you know, there’s some income loss and, you know, maybe some higher expenses. But overall, I think in Halifax, we fared pretty well. But we definitely do see clients everyday that have had hard times either making their payments or they’ve, you know, incurred more debt. And the one good thing about 2021 is with the values of the homes being up, borrowers that own homes already typically have some more equity in their property. With just the reason that the home values are up so you can refinance up to 80 per cent of the market value of your home. So if the values are up, that means that you can access maybe a little bit more money, that we should be able to enable you to get some of that stuff cleaned up.

Market value evaluation

Todd Veinotte: [00:04:44.67] Okay, so when it comes to getting the evaluation done on the property and the assessment process and all of that, can you guide people through that? Because some people might not, they may say, well, the house down the street has just sold for, and that’s public information, right? So is that a good starting point or should people go through the process of actually going through a broker, an assessment done, because there are variables at play here, right?

Clinton Wilkins: [00:05:10.21] Well, typically what we do when we meet with a client, we ask them what they think the market value of the home is.

Todd Veinotte: [00:05:15.87] Why do you do that?

Clinton Wilkins: [00:05:16.72] Well, because we want to know kind of what they think. I don’t live in the house. I’m not sure what the house looks like until we go through that appraisal process. But usually what a borrower thinks is close to what the market value is. Of course, there’s some people that think their home is worth way more than it actually is. I mean, that’s always going to happen. It doesn’t matter what the market is. And there’s some people who are more on the conservative side to say, you know what, I think it’s only worth X because I bought it for that. So I think that sometimes it’s figuring out exactly how much it’s worth is important. And obviously that’s part of the process. But I think starting with how much the borrower thinks a home is worth based on the comparable sales in the neighborhood is a good starting point. Then we would typically get the mortgage approved and part of the conditions of that approval may be a full appraisal of the property. At that point, an appraiser would go to the property, you know, take pictures of the inside, outside, and then do a market analysis based on the comparable sales. And that would take into account maybe that sale down the street. Because what they want to do is they want to compare properties that are similar that sold in that area in a recent time frame. And that’s really how that market value is determined.

Do appraisals vary?

Todd Veinotte: [00:06:29.38] How many people are in that business appraising homes? Are there are a lot in town? And is there consistency when it comes to appraisals?

Clinton Wilkins: [00:06:37.60] I would say there’s definitely some variance when it comes to appraisals. And, you know, there’s probably six or eight big appraisal firms in Halifax. And what I find normally we have relationships with a bunch of appraisers in Halifax, and depending which lender we go to, we’re able to maybe order an appraisal directly from the appraiser, which I find maybe is a little bit better, because if we have a relationship, we’re able to share maybe some information with the appraiser. There’s a little bit more communication. With some lenders, we need to order it through an intermediary, like a management company. And we don’t know who the appraiser is. The appraiser doesn’t know us, doesn’t know the borrower. And I find sometimes with those ones, the price might be a little bit lower. But I think when it comes to an appraisal, you know, you get what you pay for. And, you know, if an appraiser is paid a little bit more money, they’re willing to maybe put a little bit more effort in, in terms of really digging out that data. You know, when it’s the quick kind of burn and churn, I find sometimes the values come in a little bit lower. And when you’re looking for a higher value, you want the appraiser to really put in as much effort as they can to find those sales, whether that’s a private sale, whether they need to kind of expand their search in terms of what properties have sold. So I think it’s really important to, you know, come to someone like us because we have those relationships with the appraisers that might be able to put in a little bit more effort in getting that data together.

Todd Veinotte: [00:08:07.15] Can you contest it in some way?

Clinton Wilkins: [00:08:10.21] I certainly have seen appraisals that have come down on the lower side and sometimes that’s been for clients that are buying a home. You know, the appraisal came in short, we actually had one a couple weeks ago where the borrower had made an offer on a property for $405,000. And the appraisal came in at $380,000. So what happened in this case, normally, the borrower would have to pay dollar for dollar, everything on the purchase price that came in above the appraisal value, so the client would have had to put down his normal down payment, plus an additional $25,000. But we were able to write a letter to the realtor and the realtor was able to go back to the seller and the seller was able to negotiate the price. So they were able to come to an agreement that worked out for everyone. And that’s not normal. But we’re in a situation where a lot of homes are selling for above the listing price. And, you know, I think that’s maybe a symptom of how hot the market is. Sometimes the listing price is too low. Obviously, if you’re getting, you know, 20, 30 offers, maybe the actual listing price of the home might have been on the lower side. And they’re trying to get that competition. But in some cases, there’s emotional purchasing and I think with those emotional purchases, you’re willing to pay a little bit more. And I think it’s okay paying on the high end for a home if it’s going to be your owner occupied property and it’s property you’re going to be in for the long run. If you’re looking for like a short term type solution, if you’re looking for an investment, you know, it’s a business transaction. And I think you really have to look at the numbers.

Todd Veinotte: [00:09:46.07] And there are some times when the appraisal is, it is what it is. And you just have to tell the client, look, this is just what it is. There’s nothing else we can do.

Clinton Wilkins: [00:09:54.59] And sometimes when it’s a unique property or there’s not a lot of comparables, you know, there’s not really anything that can be done until there’s a time that there’s more sales that support that higher value.

Todd Veinotte: [00:10:04.58] Right. So we got lots more to talk about. You want to get into refinancing. What else you want to talk about in the next little bit.

Clinton Wilkins: [00:10:11.30] Refinancing, we can talk about pre-approvals, selling your existing home and purchasing a new one.

Todd Veinotte: [00:10:15.15] Okay, all part of love your home, which ties in with our Valentine’s theme.

Clinton Wilkins: [00:10:21.53] Right, exactly. Happy February.

Todd Veinotte: [00:10:23.90] Alright. Mortgage 101 Your Guide to Homeownership. Love your home edition with Clinton Wilkins and myself, Todd Veinotte. We’ll be right back with more.

Love is in the air

Todd Veinotte: [00:10:31.77] Alright, it’s Mortgage 101, Your Guide to Homeownership, the love your home edition, because it’s Valentine’s Day with myself, Todd Veinotte, the host and Clinton Wilkins, of course, the man. How’s that sound?

Clinton Wilkins: [00:10:54.12] I love it. The man is great. What do you think about February, Todd?

Todd Veinotte: [00:10:58.17] I love it. I think it’s amazing. Flowers and chocolates and all that crap.

Clinton Wilkins: [00:11:03.00] Are you a romantic person?

Todd Veinotte: [00:11:04.41] Absolutely. Sure I am. You don’t believe that?

Clinton Wilkins: [00:11:06.96] I don’t know. That kind of surprises me a little bit.

Todd Veinotte: [00:11:09.30] Why? Tell me why.

Clinton Wilkins: [00:11:09.90] I don’t know. I think that you’re kind of like laissez faire about some of these things. Hopefully your plus one’s not listening.

Todd Veinotte: [00:11:16.38] No, she’ll be listening.

Clinton Wilkins: [00:11:17.64] Okay, perfect!

Todd Veinotte: [00:11:18.66] We’ve got it all planned out. We’re going to listen. This is, this is true romance listening to us on a Saturday.

Clinton Wilkins: [00:11:24.99] You know what? I think it’s very romantic. And that could really get those emotions turning into maybe cohabitation and maybe…

Todd Veinotte: [00:11:34.53] A new mortgage!

Clinton Wilkins: [00:11:35.76] Maybe a new mortgage! Maybe you’ll sell your existing home and maybe you two will buy a home together.

Todd Veinotte: [00:11:41.07] Well, I’ll tell you what? You could do the two sales of the two properties. You could get those as referrals and the new one. So that’s three mortgages for you.

Clinton Wilkins: [00:11:50.16] That would be really great.

Todd Veinotte: [00:11:51.54] What do you think?

Clinton Wilkins: [00:11:52.11] I think it’s a great deal. And I mean, who knows what 2021 is going to bring.

Todd Veinotte: [00:11:56.97] Potentially could be more deals based on how things go.

Clinton Wilkins: [00:12:00.78] And now here’s something really interesting, and I’m sure the listeners would be really curious to hear this: maybe down the road, if this does come to fruition, at some point, we will bring her in and then we can grill her on her experience and what that actually looks like for mortgage lending. I think that would be really interesting.

Todd Veinotte: [00:12:20.46] Well, sometimes what you think is interesting, ain’t.

Clinton Wilkins: [00:12:23.31] Well, you know, I think that’s all a little bit of perspective. But, you know, obviously, I love mortgage lending. I can talk about it all day, everyday. And hopefully listeners love hearing about it, too.

Todd Veinotte: [00:12:33.66] Yes. Did you notice my nervous laughter?

Clinton Wilkins: [00:12:35.61] I did, yes. It’s going to be a little role reversal. It’ll be Clinton Wilkins the host and Todd Veinotte the guest.

“We’ve saved some relationships with some refinances”

Todd Veinotte: [00:12:40.64] That’s right. That’s right. Alright, let’s talk about refinancing, because it’s a huge part of loving your home and loving your financial life again and getting some and improving that home right home. This is a very, is this more common than it used to be? Refinancing homes?

Clinton Wilkins: [00:12:55.74] I would say probably about 40 to 50 per cent of our business is refinance. The other 50 per cent is obviously purchases. And when I talk about refinance, I kind of use that as an umbrella that might be an early renewal, that might be a refinance for renovations, debt consolidation, getting a lower interest rate, maybe it’s a refinance for investment purposes. There’s lots of reasons why people break their existing mortgage. And maybe it’s not even that you’re going to break your mortgage mid-term. Maybe you’re going to pay out your existing mortgage when it comes up for renewal. So I think there’s a lot of reasons why people would do it. And I think now more than ever, the rates are just so low that often those optics of that deal really do make sense. And, you know, when we’re talking about love, I am not a marriage counselor by any means. But I can tell you we’ve saved some relationships with some refinances.

Todd Veinotte: [00:13:50.01] How so?

Clinton Wilkins: [00:13:50.55] Well, I think sometimes it’s breaking down those barriers. Sometimes when couples are in a relationship, they kind of operate as independent operators. You know? They don’t talk about how much money they make, they don’t talk about their credit, they don’t talk about their debt. And I think sometimes we’re able to bring people together kind of on neutral ground and, you know, present a good solution on how they can move forward, you know, as a single unit together and how the whole household can benefit from something like a refinance.

Todd Veinotte: [00:14:18.66] I find that hard to believe that the two people can be married and not have any idea about each other’s finances.

Clinton Wilkins: [00:14:25.11] I see it literally every day. It would not shock you. I mean, obviously, it does shock you, but it doesn’t shock me because we see everything. And, you know, I think that there’s some couples that are really very intertwined together. Everything’s joint. You know, they have one bank account, full disclosure. But then there’s the complete opposite where nothing is joint except maybe that matrimonial home. And, you know, when we talk about things like refinance, we want to put the entire household in the best possible financial, you know, situation going forward. And sometimes that does mean paying out some debts. And, you know, we actually had a couple in this week that, you know, operate basically independently except for that matrimonial home. And they both had debt and they were both making payments on this debt. But one of the borrowers was primarily making that mortgage payment and they had lots and lots of equity in their home. You know, they were actually in pretty good financial shape, but we were able to present a plan to them that was able to reduce the amortization. They were getting their home paid off about eight years faster, and they were going to both contribute to paying that mortgage payment and they were able to clean up all their unsecured debt. So it was a great solution for them. And I think it broke down some of those barriers to talk about, okay, this is what I owe, and why, and how can we move forward together.

Refinance — back to basics

Todd Veinotte: [00:15:47.64] If you don’t have the equity, though, in the house, that’s the key to all of this, right?

Clinton Wilkins: [00:15:51.74] Yeah. If you don’t have the equity, that’s basically a deal breaker. So when you do a refinance and let’s get back to basics a little bit, and I’m just going to explain how a refinance works. So let’s assume your home is worth $300,000. That’s kind of an average house price in Halifax. You can refinance up to 80 per cent of that $300,000 market value. So that would mean a new mortgage or a new secured lending up to $240,000. Out of that $240,000, you would need to pay out all of your secured debt, i.e. mortgage, home equity, line of credit, et cetera. And then the difference between the new mortgage and what you owe already, those are the funds that you can use to consolidate debt, renovations, investments, et cetera. So we always have those conversations up front before we start doing applications and approvals just with what do we think the market value of the house is. And when we’re talking about market value, we’re talking about what do you think the home is worth. And then we can figure out what does that new mortgage look like.

Todd Veinotte: [00:16:51.75] So would you then at that point decide on a term how far out you’re going to amortize, whether it be another, because you could potentially go 25 years at that point, could you?

Clinton Wilkins: [00:17:01.89] When you’re doing something like a refinance, you can go up to 30 year amortization. That’s the longest that you can go. And sometimes a longer amortization makes sense. And that brings up a good point. You know, there are some people who really, they’re like, I want to pay down my mortgage, pay down my mortgage. But if you’re sitting on $100,000 of unsecured debt and you’re really trying to force your mortgage down, why would you pay down your lowest interest rate debt first? You should always attack that higher interest rate. And that’s why doing a refinance makes sense, because the interest rates on a mortgage are always lower than they are on unsecured debt.

Does age matter?

Todd Veinotte: [00:17:38.10] Is there an age restriction when it comes to when you should or could do this?

Clinton Wilkins: [00:17:42.36] The mortgage lending isn’t ageist when we’re talking about getting a mortgage from, you know, a bank, credit union, trust company. The only time with that maybe age is a consideration is when we’re talking about things like a reverse mortgage or maybe some type of alternative lending. So, you know, if there’s some credit issues or we can’t prove the income, that’s when we might have to go to an alternative lender. And with those lenders, they are maybe not as favorable for retirees we’ll call them.

Todd Veinotte: [00:18:13.94] Okay, but again, there’s this idea out there that if you’re over 65 or you’re over 60, or whatever it might be, you should have that house paid off. But people have debt.

Clinton Wilkins: [00:18:24.89] It’s actually the opposite. I’m seeing a lot of consumers that are getting ready to retire and part of their retirement plan and getting ready for retirement is looking at a refinance because they’re still working, they can qualify. And some of these people that are getting ready for retirement want to take out a mortgage before they retire because they know it’s going to be easier to qualify with their employment income. And they’re using those funds for investment purposes. They’re using those funds to renovate their home. And in some cases, they’re using those funds to consolidate, you know, some unsecured debt to put them in a better financial position going into retirement. And those consumers are the ones that are typically taking the longer amortization because they’re saying we don’t really care when we pay this off. Having this mortgage add a 25 or 30 year amortization is cheaper than us renting.

Todd Veinotte: [00:19:19.15] Okay, so if somebody is in front of you and they’re in there disclosing to you, they’re saying, look, I’ve got six more months left, I’m retiring, you still file all of that information? That’s okay with lenders?

Clinton Wilkins: [00:19:29.32] Well, mortgage loan is really a snapshot in time. So we look at their income, their assets and their credit based on what the situation is today.

Todd Veinotte: [00:19:38.05] At that time.

Clinton Wilkins: [00:19:38.80] Because we don’t know, they could say, hey, I might retire in six months, they may stay for six years. We don’t know. I hear this all the time to be like, oh, yeah, I’m retiring next year. Right. You’re retiring six years from now. And, you know, unless they’ve actually retired, then obviously that situation is different. But we can’t really forecast the future. And that’s why mortgage lending is really a snapshot in time. And, you know, if you don’t qualify today, maybe you will qualify tomorrow. And sometimes there are small things that you need to do to make things work, but we’re able to give that feedback and make that plan together.

Todd Veinotte: [00:20:13.45] Just quickly, some of those insurance products and things like that, are they, they would be impacted by age would they not?

Clinton Wilkins: [00:20:20.66] Yeah, for sure. So I know when we’re talking about things like credit or insurance, life disability insurance that is tied to the age and the older you get and the more, you know, debt that you may have that you want to cover, the premiums are certainly going to go up. And a lot of those products are capped at 60, 65, 70 years old, depending on what type of product that is.

Todd Veinotte: [00:20:41.83] Ok, lots more to talk about in Mortgage 101 Your Guide to Homeownership with Clinton Wilkins and myself, Todd Veinotte. We’ll be right back

Listening to Kendrick Lamar

Todd Veinotte: [00:20:48.37] I have no sweet clue what song this is, Clinton.

Clinton Wilkins: [00:20:58.30] You don’t like Kendrick Lamar?

Todd Veinotte: [00:20:59.56] I didn’t say I didn’t like it. Don’t jump to conclusions, my friend. I said I don’t know what it is.

Clinton Wilkins: [00:21:04.51] It’s kind of easy listening. You know, popular music.

Clinton Wilkins: [00:21:12.34] I don’t know if it’s a shot or not. I think it’s kind of progressive and light.

Todd Veinotte: [00:21:16.12] Okay, but that was a shot. I’ve had shots fired before and I recognize them. It’s okay, though. I need that. Keep me on my toes.

Clinton Wilkins: [00:21:24.91] You know what? I really like the like 80s and 70s rock. And even in the office half the day we play 70s and 80s. The rest of the day we play like top 40. And then we get into stuff like this, like that progressive beats.

Todd Veinotte: [00:21:39.83] Get your mojo going.

Clinton Wilkins: [00:21:40.39] Yeah, exactly.

Todd Veinotte: [00:21:42.04] Speaking of mojo, Mortgage, 101 Your Guide to Homeownership with Clinton Wilkins, who happens to own the business. Tell people about your business. We didn’t even do this when we started the show.

Clinton Wilkins: [00:21:53.62] I assume everyone knows already.

Todd Veinotte: [00:21:54.64] Don’t assume anything, my friend.

Clinton Wilkins: [00:21:56.35] Anyone who wants to check us out, check us out at TeamClinton.ca/radio. All kinds of great information on there. Today we’re talking about love your home. It’s February. It’s the month of love. And I think homeownership and your home is such a big piece of your life. You spent so much time in your home. And, you know, I think there’s so many interesting things around homeownership and that’s really what we’re talking about.

Love it or list it

Todd Veinotte: [00:22:20.11] Okay, so part of this is obviously listings. I mean, it’s a huge part of the of the process. If you don’t have lots to listings out there, if you’re a buyer, you’ve got very limited inventory. Conversely, if you’re selling, that’s good news.

Clinton Wilkins: [00:22:36.09] I think now is the time to sell. If you’re considering selling this year in the near future, get your home listed. There’s lots of demand out there. And I think that there’s a couple of things that we should really touch on. There’s some people who are still in a bit of financial hardship and that you just cannot right the ship. There’s no better time to list your home than there is right now because there certainly is pent up demand and you’ll get, you know, top dollar for that home. And I’m sure, you know, I can even speak to us. We have hundreds of people out there that are pre-approved, that are looking for homes every day. And there’s lots of listings that get offers right away and we’re talking multiple offers. So I definitely think that it’s worth it to think about listing your home if you’re going to do it.

Todd Veinotte: [00:23:24.37] Okay, so once you list, people are reticent sometimes to list because we talked earlier in the show about vacancy issues, less than two per cent so, and tight inventory. So for all the reasons why you would want to list if you own are some of the reasons why you might not want to list, because then you’re stuck trying to find a place.

Clinton Wilkins: [00:23:45.79] Exactly. And I guess it all depends if you’re going to buy again or if you’re going to rent. But sometimes selling will right the ship and you can still buy again. So when we’re talking about things like refinance, you can refinance up to 80 per cent of the market value of your home. But when you sell your home, you’re going to realize all of the equity, less obviously the fees, like maybe a mortgage penalty, you know, realtor’s commission, lawyer’s fees. But you’re going to realize all of that equity. And then when you buy a new home, if it’s owner occupied, maybe you only need to put down as little as five per cent when you buy a new home. So in Canada, when you buy a home, you can get a high ratio insured mortgage. There’s three mortgage insurers in Canada and you can put down as little as five per cent and get that high ratio insurance. For those borrowers that might have a little bit more skin in the game, you know, you sell your existing home, maybe make a good profit, and you have a good solid down payment for a new property. If you put down 20 per cent or more, you can get a conventional mortgage. And that means that you don’t need to have that insurance.

Todd Veinotte: [00:24:47.35] Ok, I’ve heard the term porting a mortgage. I’m sure that you’ve done that a million times.

Clinton Wilkins: [00:24:53.75] Yeah, we definitely do a lot of ports. Yeah. The big reason why someone would want to port is maybe they have a good interest rate on their existing mortgage or the penalty is prohibitive to pay it out and get a new one. So oftentimes porting doesn’t make sense because normally paying out the penalty and getting a lower interest rate, especially in this rate environment, that makes sense because the interest rates today are at historic lows. So if you can afford the penalty and paying out the penalty makes sense. We’re doing less ports now than we did before. But that’s going to change because in two, three years, four years, five years down the road, when the interest rates are higher and if you still have a little bit of term left, it might make sense to port if obviously the interest rates are lower on your existing mortgage than what’s being offered at that time.

Mortgage renewals and credit scores

Todd Veinotte: [00:25:49.24] Okay, if somebody has some credit issues and they’ve got a mortgage in place at a good interest rate, I’m sure it’s sometimes it’s wise just to simply renew the mortgage with your existing lender.

Clinton Wilkins: [00:26:02.28] And we tell people that. We definitely do. And sometimes a refinance can make sense and sometimes it doesn’t. So, you know, if there maybe is some credit issues, maybe if there’s some income issues, but when you got your mortgage, your situation was different. Sometimes it makes sense just to stay put, keep your existing mortgage in place. And typically an existing lender will renew you at the market rates.

Todd Veinotte: [00:26:26.94] They don’t even ask for documents, do they?

Clinton Wilkins: [00:26:29.28] Usually not on renewal. It really depends. That’s not always the case, though.

Todd Veinotte: [00:26:34.86] Okay, what might it be an exception?

Clinton Wilkins: [00:26:38.31] A lot of lenders will check your credit at renewal, and if the credit is not up to standard, they may either only offer you a one year term and they may only offer your renewal at higher rates. So most lenders, especially the bank lenders, all have posted rates. Those posted rates are typically much higher than what we’re able to get on a discounted rate. So, for example, the posted rate on a five year fix today is 4.79. But a lot of borrowers are getting five year fixed rates on insured mortgage at like 1.69, 1.59. So obviously there’s quite a big discount off that posted rate. But some lenders on renewal don’t offer as deep of a discount, if any discount, if there was any repayment history, any repayment issues with the mortgage.

Todd Veinotte: [00:27:30.81] Big red flag.

Clinton Wilkins: [00:27:31.89] That’s a big one. You know, paying the mortgage is really the most important thing to do or if there is any other credit issues. You know, obviously, the credit matrix makes up a big piece of how mortgages are originated, and it also makes up how much risk the lender has. And, you know, I get asked from borrowers all the time, they’re like, well, if I had a better credit score, could I get a lower rate? No. If you have a good credit score, so typically what we say is good is 680, 700, 720. If you have a good score, everyone’s going to get the same rate. It’s really more about the mortgage product. But on renewal, if you have a credit score that’s maybe below 680, that may impact the pricing on the renewal or if the lender’s willing to offer a renewal. So typically, most lenders will offer renewal unless you’ve had issues paying that mortgage during the term.

Todd Veinotte: [00:28:28.20] Okay, so if your lender is one of the big banks, let’s say your mortgage lender, you get that documentation in the mail or email or whatever to say, hey, your mortgage is renewing. This is what we’re going to renew it at. Perhaps you’ve lost a job, maybe you’ve had some bumps and maybe just play it quiet and just let it renew?

Clinton Wilkins: [00:28:46.89] Yeah, I think, like, you know, I think you should look at each renewal individually. When oftentimes the renewal offers go out they’re, not at the deepest discount. So I’m seeing renewals going out today, I’ve seen five year fixed renewals going out as high as 3.79. So that’s basically 100 basis points off the posted rate. So that’s kind of their first offer we’ll say. You know, if you’ve had credit issues or if there is issues with the income, you may have no choice but to take that. But in those scenarios, I typically recommend either take a one year fixed or go into maybe the variable rate product, even if the discount isn’t as good. So then when you’re in a situation to make a move and change lenders, then you’re not locked into a five year fixed rate.

Pre-approval process

Todd Veinotte: [00:29:38.34] Okay, somebody’s lists, they decide to list, they want to obviously purchase. Then the pre-approval comes into play. Right? What’s the pre-approval process that you go through?

Clinton Wilkins: [00:29:46.65] Pre-approvals are super important. I don’t think anyone should be looking at a home. I don’t think any realtor should show anyone a home without a good, solid pre-approval. And the way that it works here is we do a full application for a pre-approval, which is a little bit different than every lender. Some lenders will do like a 60 second pre-approval. That’s more like a little bit of a pre-qualification. When we go through the pre-approval process, we ask for income documents. We do a full credit bureau, we review the assets to make sure that you are good and solid and that there’s not going to be any major surprises when you’re making an offer. You want to know when you go and make an offer that we can get your mortgage approved. Now, that being said, not every borrower, we will do an actual full pre-approval and get a rate hold in place. If there maybe have been some credit issues in the past, but I believe we can get an approval. Sometimes we will do that pre-qualification and say, okay, this works, but I’m not going to get a rate hold and a pre-approval in place because it’s just too marginal that we can’t secure a pre-approval. But we always have more power when there’s a real live offer in place. So, you know, I think that you need to know what your situation is. And we never like getting borrowers’ hopes up if we don’t think that it’s something that we’re able to do.

Should sellers get an appraisal?

Todd Veinotte: [00:31:07.08] Right. What about due diligence on your property before you list it? Should you hire somebody to maybe come in? I know that generally the purchaser pays for building inspection, but is it sometimes advantageous to be proactive, to do that type of thing yourself as the seller? Then you can disclose? I think the more you disclose, like finance is often better? Maybe I’m wrong.

Clinton Wilkins: [00:31:30.27] Yeah, I think that a lot of sellers are doing some pre-inspections. I think that was definitely a thing when maybe the market wasn’t as hot. I think less sellers are doing that type of due diligence now just because there’s so many options in terms of selling. But when we’re in this market that is hot and there’s so many offers, what we’re seeing more and more is that sometimes the sellers will take the highest price offer. But in that offer, there will be conditions for the buyer to say, okay, we need to have a financing condition, we have an inspection. And when they go through the inspection, if they do find issues, oftentimes the sellers need to fix it before closing or the buyer will negotiate a bit of a price reduction to cover the cost to fix any of those issues that are found in the inspection. I think it’s being cognisant of it. And I think when you’re a seller, you obviously want to make sure that your home’s in the best possible condition. You know, when I was selling my last home, I did things that I didn’t need to do, like I got my heat pump serviced because I wanted to make sure that the buyers that were buying my home had a good, solid home and then they weren’t going to run into any issues.

“Borrower’s great, but the property sucks”

Todd Veinotte: [00:32:39.15] Wow, so concerning the pre-approval process, people need to know that’s not underwriting. Right? I think sometimes people think they’ve got a pre-approval and then they run into snags at underwriting.

Clinton Wilkins: [00:32:53.31] Yeah, and I think that, you know, when we do conventional pre-approvals, those are underwritten. So basically you have a pre-approval conditional on the on a firm purchase agreement and the lender needs to like the home. Sometimes we’ll get a pre-approval and the borrower’s great, but the property sucks. And, you know, sometimes that could be the maker or the breaker because it’s not just the borrower. The lender needs to be good with the security of the property. So sometimes the property is the problem, not all the time, but sometimes. When it’s a high ratio, so when it’s an insured mortgage and you’re putting down less than 20 per cent, not only does the lender need to have an approval, they need to have concurrence from the insurer that they’ll approve you as well. So there’s two layers that need to be done. And the insurers do not review a file unless you have a real live offer. So sometimes when it comes to, you know, a purchase, things can come up that the insurer finds that we don’t see and the lender doesn’t see. So sometimes they maybe find previous credit issues or maybe they find, you know, issues with the property that we just don’t know upfront. So I think any time that there’s an insured mortgage, obviously there’s more due diligence and we like to give as much time as possible when we are submitting a file for approval.

Todd Veinotte: [00:34:15.09] Ok, we’ve got a little bit of time left. What else do you want to get to quickly? In the next little bit.

Clinton Wilkins: [00:34:19.62] I think, you know, when we get to our next segment here, so hopefully everyone still stays tuned in, we’re going to talk a little bit about purchase plus improvements. So how can you improve that property you’re buying. And we’ll talk a little bit about construction and building new homes.

Clinton picks the music

Todd Veinotte: [00:34:34.17] Okay, we’ll be right back with Mortgage 101.

Todd Veinotte: [00:34:38.20] I think it’s pretty obvious that I selected the first two songs and you selected the second.

Clinton Wilkins: [00:34:49.02] Isn’t that what relationships are about? It’s like you have to give a little bit, take a little bit?

Todd Veinotte: [00:34:53.75] Yeah, sure. What is this?

Clinton Wilkins: [00:34:56.10] This is called Real Love. And I mean, February is the month of love, Todd, right?

Todd Veinotte: [00:35:01.53] It sure is. Welcome back to Mortgage 101 Your Guide to Homeownership with Clinton Wilkins and myself, Todd Veionotte. It’s the Love Your Home Valentine’s Edition. And we’re going to spend the last little bit of our time on News 95.7 talking about purchase plus improvements and construction. And this is scary territory for some people, isn’t it? Let’s just call it what it is?

Purchase plus improvements — “location, location, location”

Clinton Wilkins: [00:35:21.78] Well, I think it’s unknown territory. I think the unknown is scary. I think when you get into renovations, you know, lots of things can go wrong. And I think that you need to have a little bit of a backup plan and you need to have that resiliency that you can get through it. But more and more borrowers are doing things like purchase plus improvements. So really what that means is you can buy a home and you can get a quote from a contractor and we can finance up to a maximum of $40,000 along with that purchase. And those funds are held back until the work is complete. So normally the lenders will allow you to take 120 days to complete the work and then the funds are released. So it’s a really great way to buy the worst house in the best neighborhood. You know, it’s all about location, location, location. And, you know, I think when you do things like renovation, it’s about making that home yours and how can you make it fit your personality and your needs and how can you improve things like kitchens and bathrooms and flooring and windows. These are the things that we have, the conversations with the borrowers all the time.

Todd Veinotte: [00:36:27.93] But you need to have access to some funds or lines of credit or whatever it might be in order to float that.

Clinton Wilkins: [00:36:35.79] Or the contractor needs to be able to float it. And they know that they are going to get paid when the work is complete.

Todd Veinotte: [00:36:41.04] How often does that relationship, type of relationship happen then?

Clinton Wilkins: [00:36:44.79] I think it happens quite a lot. Yeah, I think most contractors know and have that good faith that they’re going to get paid when the work is done and when we do things like purchase plus improvements, sometimes the contractor will ask the lawyer to do an undertaking in a direction to pay so they know that they’re going to get paid when that work is complete.

Todd Veinotte: [00:37:06.69] Right. So they don’t want to go on just somebody’s word. They want to have it in writing, obviously.

Clinton Wilkins: [00:37:11.95] Yeah. And I think sometimes, you know, contractors obviously probably want a deposit and sometimes they want payment along that project. So depending on which contractor you’re going to use, you need to be able to fill that, the terms of that agreement. But you’re not going to get those funds from that hold back until the work is complete.

Todd Veinotte: [00:37:31.27] Okay, so if you’ve got timelines in place and we know that contractors are going to run off their feet, you know, that can be an issue as well, can it not? Whether contractors can fulfill their commitment with this work?

Clinton Wilkins: [00:37:43.44] I think it can be certainly a challenge. And I think that if you’re going to do things like purchase plus improvements, you need to know you’re going to get the work done. The one good thing is that normally when you make an offer on a property, maybe it’s not going to close for one, two, three, four months down the road. So when you get something together with a contractor, they can start ordering the materials before you even close on your new home so they can start working really, day one.

Making sure the improvements increase value dollar for dollar

Todd Veinotte: [00:38:09.27] Must be a bit of a challenge when it comes to pricing this type of thing with the cost of, the fluid cost of material that’s going up. Right? So is this sometimes, is it sometimes difficult to nail down a price and to know how much money you need going into these things?

Clinton Wilkins: [00:38:24.57] Well, I think, you know you’re doing purchase plus improvements you almost need to bring the contractor in with you when you go look at the home, because if that’s a make or breaker of you buying the property, then you really need to have that quote up front. And we need to get it approved with your purchase. Because, you know, we’re seeing sometimes people will go and they’ll get a quote for $38,000, let’s say, but the as improve value would only support maybe improvements of $30,000. So that means that you’ve really kind of gone over what the market will support. And I think that’s really a symptom of sometimes borrowers paying top dollar for the property as well, because there’s certain threshold of, you know, how much a property is going to be worth. And we all know there’s things that borrowers like to do that might not necessarily increase the value of the property. So there’s a difference between, you know, maintenance and capital improvements. So, you know, I think, you know, if a borrower is going to put in a pool that’s not necessarily going to increase that property value. In some cases, maybe it decreases it. There’s certain things that are really, you’re going to make the best bang for your buck. And we want to make sure that when you do these purchase plus improvements, you’re going to increase that value dollar for dollar for what you’re going to spend.

Todd Veinotte: [00:39:35.88] Okay, so recently HRM passed a bylaw which allowed people, I don’t know if it’s been enacted or if it’s in place yet, to build, I don’t know if granny suite is the right term? But they, I can’t remember the terminology, but in their back they can add to their backyard?

Clinton Wilkins: [00:39:51.99] Laneway suites and,

Todd Veinotte: [00:39:54.17] Can’t remember what it’s called. Have you seen people coming in with that?

Clinton Wilkins: [00:39:58.36] I think as the property values go up, we’re seeing more and more demand for properties that have a secondary suite. It’s a great way to offset your housing costs. You know, just imagine, like, if you maybe have a bungalow with a finished basement and that basement is converted into an in-law suite, it can be a great way to really reduce your housing costs. I know some borrowers that almost have a net zero housing cost due to the rent that they’re bringing on in on secondary suites. So when we do owner occupied financing, we can finance residential properties up to a four unit. So I know lots of first time homebuyers that are buying three and four unit properties, living in one unit and then renting out the other units to offset the cost of operating that property, mortgage, property tax, insurance, maintenance. And, you know, depending on how you want to live, this might not be your forever plan. But it’s a great way to get first-time homebuyers into the housing market and really make sure that their finances are going to be protected. Normally, when you buy an owner occupied property or a two unit you can put down as little as five per cent when you get into three units and four units at the minimum of 10 per cent down.

Rent income from owner occupied rentals

Todd Veinotte: [00:41:10.83] Okay, but the lender, from what I understand, won’t consider that income until you’ve got a year or so in which you show it income on your income tax. Is that accurate or not?

Clinton Wilkins: [00:41:20.82] We can actually use 50 per cent of the rent for the other suites towards your gross income when we’re doing an owner occupied plus rental. so we can either take the existing leases that are in place for those units and we can use 50 per cent of that rent towards your gross income. Or if the property’s not rented, there’s some lenders that will allow us to get a market rent analysis and we can use 50 per cent of that rent towards your gross income. So it’s a great way to also help you qualify for maybe a more expensive property that you might not be able to normally support just on your income alone.

Todd Veinotte: [00:41:53.79] Right. So the idea is just 50 per cent so that if the unit is not occupied for a couple of months or whatever it might be, that you’re still able to meet that financial commitment to some degree.

Clinton Wilkins: [00:42:05.82] I think the reason that they use the 50 per cent mark too is, you know, the rent isn’t going to pay just the mortgage. There’s so many other expenses that you have to think about when you own a home. You know, you just talked about shoveling. Maybe you need snow removal. There is power, oil, you know, heating expenses, maintenance, insurance, water. These are things that are outside of that mortgage payment that sometimes I think homebuyers kind of forget about when they think they’re like, okay, I know what my mortgage payment is going to be, what we can’t forget about property taxes, plus everything else that comes into operating that home.

Advice for new construction

Todd Veinotte: [00:42:41.58] And new construction, what’s your quick advice for brand new construction? Kind of the same thing, is it not?

Clinton Wilkins: [00:42:47.13] I think new construction, you know, we’re certainly doing a lot of new construction, whether that’s a turn and key. But some borrowers want a piece of land and they want to either do a self build or a contractor build. We certainly offer that type of financing and not every lender is really into construction. Obviously, it’s a little bit of a riskier type of transaction. And typically the rates with construction are a little bit higher than what a borrower could get just on a normal purchase or purchase plus improvements. But I think everyone has, when it when it comes to construction, everything is a case by case basis. And we really want to just understand the ins and outs of how the transaction is going to work.

See you next month!

Todd Veinotte: [00:43:24.72] Alright. Let everybody know how they can get a hold of you and all that you do and all the best ways so that they can get your advice and potentially come in and see you or some of your team here.

Clinton Wilkins: [00:43:34.74] The first place to check us out is online at TeamClinton.ca/Radio. We have offices in Dartmouth and Halifax. And, you know, now more than ever, we’re seeing clients over technology and we’re doing telephone calls. We’re lending across the country. You know, many of our clients are in the military. We’re moving them all the time. And we’re getting a lot of calls from outside Atlantic Canada for borrowers moving here to this area. So, you know, we’re certainly willing to help on all kinds of different transactions. It doesn’t matter what type of mortgage lending that is. Certainly check us out online. I think that’s the first step. We’ve lots of great information in there. And we’re going to be back next month.

Todd Veinotte: [00:44:14.64] Yeah, back next month. We’re doing this all year on News 95.7. And people can check out our Facebook livestream as well every Tuesday at 12:30 p.m..

Clinton Wilkins: [00:44:21.43] Yeah. We’ll be on next Tuesday at 12.30 p.m. on our Facebook. If you go to our website at TeamClinton.ca/radio you can surf right on to our Facebook page, like it, nd then you can see Todd and I live on the air next Tuesday.

Todd Veinotte: [00:44:34.20] All right. We’ll see you next month for Mortgage 101. Thanks, Clinton.

Clinton Wilkins: [00:44:37.81] Thanks, Todd.

If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.