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Mortgage 101 – mortgages and salaries | May 2021 Part 3

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on News 95.7, the guys talk about changes to real estate prices and borrowers’ salaries, types of mortgage misrepresentation and a mortgage broker’s relationship with clients and lenders.

Mortgage 101 with Clinton Wilkins & Todd Veinotte – May 2021 – Part 3

Don’t feel like watching the video? Check out the transcript below.


Welcome to part three of May’s Mortgage 101!

Todd Veinotte: [00:00:14.66] Oh, yes, Michael Bublé, there’s some Canadian content right there.

Clinton Wilkins: [00:00:19.76] And you know what? The last artist was Canadian too. He was actually a haligonian.

Todd Veinotte: [00:00:23.87] Is that right?

Clinton Wilkins: [00:00:24.11] And you know what?

Todd Veinotte: [00:00:24.68] Why, why you always one up me?

Clinton Wilkins: [00:00:26.72] I don’t know. I’m, maybe I’m like the one up person.

Todd Veinotte: [00:00:29.06] You know what I mean? I had a nice moment there.

Clinton Wilkins: [00:00:32.21] Anyway, this one is Todd’s pick. If everyone’s curious.

Todd Veinotte: [00:00:35.15] It is. It’s called Sway. Welcome back to, and I’ve got a Michael Bublé anecdote, quickly. But welcome back to Mortgage 101, Your Guide to Homeownership with Clinton Wilkins myself, Todd Veinotte, right here on News 95.7, which I’m on seven days this week.

Clinton Wilkins: [00:00:50.33] I mean, I mean if, I think people are tuning in on Saturday they know they’re tuning in to hear our show.

Todd Veinotte: [00:00:56.21] Oh yeah absolutely. Or Sunday. Don’t forget about Sunday.

Clinton Wilkins: [00:00:58.94] I know.

Todd Veinotte: [00:00:59.45] You seem to discount Sunday.

Clinton Wilkins: [00:01:00.20] And Sunday we’re actually on after, you probably just heard our friend Niki Jabbour.

Todd Veinotte: [00:01:04.22] Absolutely. The Weekend Gardener, which is a great show.

Clinton Wilkins: [00:01:07.07] Yeah.

Michael “Bubble”

Todd Veinotte: [00:01:07.97] Anyway, Michael Bublé, quick anecdote. Back in my early days in news reading, I was not up really on pop culture at the time and I’m not really to this day. And I read an entertainment story and it was Michael Bublé and I said Michael Bubble. And never heard the end of it.

Clinton Wilkins: [00:01:23.09] So do they call you like Todd Bubble?

Todd Veinotte: [00:01:25.16] No, but I’m serious. People, to this day, if I see them in that market will say, Hey, Michael Bubble, I remember that. What do you think? Sheer incompetence.

Clinton Wilkins: [00:01:33.50] Was that on the radio?

Todd Veinotte: [00:01:35.51] Yes!

Clinton Wilkins: [00:01:35.54] Okay.

Todd Veinotte: [00:01:36.63] I said Michael Bubble in my news read.

Clinton Wilkins: [00:01:38.54] In New Brunswick or in Halifax?

Todd Veinotte: [00:01:39.61] It was in New Brunswick. Yeah. Sheer incompetence on pure display.

Clinton Wilkins: [00:01:43.37] I mean,

Todd Veinotte: [00:01:43.94] I do that every day on the radio.

Clinton Wilkins: [00:01:45.38] Sometimes we just get it wrong. And you know what? I’m not always right, but I think we learn. We learn from our mistakes.

Todd Veinotte: [00:01:51.65] It’s true.

Clinton Wilkins: [00:01:52.16] And, you know, it is what, it is what it is. And I think that, you know, we’re always learning. And I think that’s what’s also cool about mortgage lending and about real estate. Nothing is necessarily the right answer. It’s sometimes, it’s personal opinion or if it’s what’s happening in the day, or there is a bit of emotion.

“We’re in the relationship business”

Todd Veinotte: [00:02:12.11] But listen, but you can do, but you can do the right thing, though. As a lender.

Clinton Wilkins: [00:02:16.72] And we always want to do the right thing. But is there always the absolute this is the only way forward? No, there’s always probably more than one path.

Todd Veinotte: [00:02:26.14] I know that. But there are people in the business, in any business where you can put somebody on one path and make X amount of dollars or you could put them on another path and make that amount of dollars. And ethics is important. And I do believe the reason why you and I have, why I am comfortable with this relationship with you doing this, is because I believe you’re an ethical person. I know you are. And that matters. Right? And it truly does. And that’s serves you well over the years. That’s 15 years of this, right?

Clinton Wilkins: [00:02:54.70] Yeah. And honestly, there’s clients that we declined or we chose not to do the transaction, or we weren’t able to do the transaction 15 years ago that are coming back now. And there’s clients that maybe even chose that they weren’t going to come with us for whatever reason. Maybe it wasn’t the right fit at the time. And they call us and they said, you know what? We made the wrong choice. We should have went with you guys. We know that it was, you guys were the better choice. But, you know, for whatever pressure or misinformation that they got, they decided, they went another direction and they were regretful. But they’re like, you know what? Next time we’re coming with you. And you know what? That feels good. You know, I think that we try to give the best advice to everyone. And I think that we really do have a vested interest in the success of our customers because we’re in the relationship business. I’m not even sure that I really do mortgage lending anymore. I think I do education and I think I do awareness. And, you know, I think that’s more important than the dollars and the cents. And I think the dollars and cents always come, no matter what type of business you have, if you’re providing value to the consumer. And that’s what really what we focus on.

The “F word” in mortgage lending

Todd Veinotte: [00:03:57.97] Do you ever, I don’t want to say report somebody, or do you ever see anything that that’s clearly incompetent in the business? And when you come, have people come across your desk, is there a way to deal with that through channels?

Clinton Wilkins: [00:04:11.05] If we’re talking about the F word, we’ll call it the F word in this instance. Yeah. You know, we really refer to it as like misrepresentation. And it could be misrepresentation for a variety of different reasons. And sometimes, you know, we refer to it as fraud for shelter and sometimes it’s fraud for profit. And I think we have a very low, you know, instances of fraud here and in Halifax and across Atlantic Canada, and down the south shore. I think we have very low numbers of fraud, but it still happens. And I think the more and more transactions that we have and the hotter and hotter that the market gets, and really as prices increase, you know, we’ve seen more fraud. And usually we’re the ones picking it up. We pick it up before the lender or the mortgage insurer. We pick it up because, you know, the reason that we do is because we’re doing so many transactions and we know what’s right, wrong, indifferent. And here’s an example. You know, you know, sometimes it’s very innocent misrepresentations, i.e., I’m buying this property as owner occupied, but it’s actually going to be a rental.

Todd Veinotte: [00:05:21.61] Right.

Clinton Wilkins: [00:05:22.39] Or I’m buying this property as a rental and it’s actually going to be owner occupied.

Clinton Wilkins: [00:05:26.02] Obviously, that makes a difference. And maybe you just want a lower rate or maybe you wouldn’t qualify the other way. And, you know, there’s 50 shades of grey and mortgage lending, but there’s certainly some very blatant misrepresentation. And sometimes that really even comes down to the documents that we get. And, you know, we’re really experts at looking at these documents and we are the safeguard really for a part of this Canadian banking system, which is very, very regulated. And we want to ensure that the lenders are protected, but we also want to ensure the consumer is protected. We want to make sure the consumer is not going to get in over their head because that’s not good for anyone and it’s certainly not good for the customer. At the end of the day, as much as they may want it, we need to also make sure that they can afford it, and that they can afford it based on things like the stress test and they can afford it over the long run. It’s not just about getting in the house and everything is going to work out magically.

Mortgages and Salaries — an imbalance?

Todd Veinotte: [00:06:22.98] I would think that with the prices skyrocketing the way that they are, I know it’s five per cent for first time homebuyers and, but it must be becoming increasingly difficult for people to scrape together closing costs and five per cent. Are you seeing people who would qualify but just can’t pull together that?

Clinton Wilkins: [00:06:41.96] Yeah, I would say there’s lots of times that we can get people preapproved, but the biggest hurdle is the down payment and closing costs. And, you know, there are solutions. There’s borrowed down payment and stuff like that. But, you know, I think one of the biggest challenges are really qualifying for enough mortgage to buy the house you want. You know, I heard a stat the other day that the average house price in HRM is above $400,000. So, you know, if you’re trying to do a preapproval for a purchase of 200 or 250, you best be looking out in the countryside because you’re not going to find anything, otherwise. And we would really be maybe getting your hopes up with a preapproval when you can’t even find something to buy. And that’s where it’s very challenging right now. I think we’re in a little bit of a situation for some first time homebuyers that it may be a by now or by never, because as the price increases, it’s going to become less and less, you know, achievable for some of them.

Todd Veinotte: [00:07:43.51] How much would just roughly a $400,000 mortgage biweekly payment be on the, can you do some math in your head?

Clinton Wilkins: [00:07:50.69] And I would say probably with property taxes, you’re talking about a couple of grand a month in terms of like what the payments are.

Todd Veinotte: [00:07:56.13] Two grand a month.

Clinton Wilkins: [00:07:57.09] Yeah.

Todd Veinotte: [00:07:58.56] What type of income would somebody need to, to,

Clinton Wilkins: [00:08:01.38] To qualify for that?

Todd Veinotte: [00:08:01.65] Now, now I get it, that debt and other things that come into play here.

Clinton Wilkins: [00:08:04.92] I will tell you what the rule of thumb is Todd, it’s for, you can qualify for four times your income. That’s kind of the rule of thumb.

Todd Veinotte: [00:08:12.94] Oh is that right?

Clinton Wilkins: [00:08:12.94] So if you make $100,000 a year as a household income, you could qualify for a $400,000 mortgage.

Todd Veinotte: [00:08:19.49] Yeah, okay. So generally you’re going to have some people because I mean a hundred grand, you’ve got a lot of those people working in government in the Sunshine List we know and whatever.

Clinton Wilkins: [00:08:29.94] Or there’s two borrowers that make $50,000.

Todd Veinotte: [00:08:31.80] But, but generally I’m thinking you’re going to have a couple, two teachers or something like that.

Clinton Wilkins: [00:08:36.21] A lot of the transactions that are happening today have two borrowers. It’s just to the cost of real estate. You know, if you don’t have the income to support it, you need a second borrower. That’s just reality. I’m also seeing a lot of borrowers coming up with huge down payments, which was not the norm a couple of years ago. We’re seeing clients coming in with very large down payments and putting down even much more than even 20 per cent down. Sometimes they’re putting 30, 35, 40.

Todd Veinotte: [00:09:04.50] How old are these people, usually?

Clinton Wilkins: [00:09:05.67] And sometimes, they’re young people sometimes. So I think that there’s some family gifts obviously happening. And if someone really wants to get into the housing market and maybe they can afford a certain amount of mortgage, and if you can’t afford more, you’ve no choice but to make up the rest of it in a down payment.

Todd Veinotte: [00:09:19.89] So, $2,000 seems like a lot of money, but if you’re renting a three bedroom apartment, you’re spending that probably anyway, right?

Clinton Wilkins: [00:09:28.50] And we are live here from downtown Halifax. And we’re actually right over by Queen’s Mark, which is a new apartment hotel complex in downtown Halifax. And I saw a poster that a two bedroom apartment there starts at $3,000.

Todd Veinotte: [00:09:44.62] Exactly. Exactly.

Clinton Wilkins: [00:09:46.71] So you know what? To be able to afford even that type of rent, I think certainly it needs to be over six figures in the household to be able to really swing it.

Todd Veinotte: [00:09:56.40] Do you have concerns, though, and we kind of talked about this earlier in the show, but do you have concerns for the person making $60,00 to $65,000 a year, single? They’re out of the market now. I mean, that’s, and that’s that’s a lot of people. And I don’t know that’s a good spot to be.

Clinton Wilkins: [00:10:11.73] I don’t know if it’s a good place to be either. And I think the house prices did increase. But I’m not sure that people’s income now have increased as much. If anything, some people took a bit of an income hit over the last couple of years because of COVID and economic challenges and such. So I think it’s going to be an interesting time. You know, another article that I read, you know, just a couple of weeks ago was that when we’re through this COVID winter will call it, we are going to be like the roaring 20s or roaring 30s. You know?

Todd Veinotte: [00:10:46.41] It was the 20s. The depression, was in the 30s.

Clinton Wilkins: [00:10:48.66] That was not a good time. So like the roaring 20s. And, you know, that’s going to be interesting, I think.

Todd Veinotte: [00:10:54.76] I don’t know if that, that’s I mean, people say that. But I guess what I’m getting at is, is that I do, there was for a very long time you could get by on $50,000. Live that dream, as you call it, and get a house, if you played, if you did things right, kept your debt low.

Clinton Wilkins: [00:11:14.62] Low debt. Decent down payment.

Todd Veinotte: [00:11:15.45] And I just I think that that’s an era that we’re losing. And I think that,

Clinton Wilkins: [00:11:21.04] I think in Halifax, I think in Halifax it’s not possible anymore.

Todd Veinotte: [00:11:25.47] Yeah.

Clinton Wilkins: [00:11:26.14] If you want to buy maybe a House in Windsor or if you want to go to Truro, maybe. But those markets are really booming as well. So I don’t know, I, I don’t think it’s possible to buy a house for $200,000 or $250,000. They’re very few and far between for the ones that are, that are available. And I think if you’re looking at real estate, even in that price point, it probably needs a lot of work. So unless you work in the industry in terms of construction, you’re probably biting off more than you can chew, unless you have a good amount of cash to be able to really improve that real estate over time.

Home construction preview

Todd Veinotte: [00:12:06.55] Yeah, and in the next segment, I do want to talk to you about renovations and all of that, because there’s a lot, there’s a lot of layers to that. But lumber prices and material prices, they’re going through the roof as well. I’ve seen exponential growth, 70 plus per cent. And for lumber, I mean, that that is hard to bear.

Clinton Wilkins: [00:12:25.33] That is hard to bear. And I think some builders are not bearing it, to be honest. I think some builders are having a very, very hard time right now. You know, I’m seeing some purchases of new construction, turn and key homes getting delayed and delayed and delayed. And I’m dealing with,

Todd Veinotte: [00:12:43.60] From the beginning of them?

Clinton Wilkins: [00:12:46.03] Yeah, for possession. So we’re dealing with a couple situations now that the builder basically has asked the buyer to terminate the agreement.

Todd Veinotte: [00:12:58.50] Wow.

Clinton Wilkins: [00:12:58.54] Because of the cost to complete the home is just in excess of what the, what they’re selling it for. So they have to basically complete the project at a loss. So they said, you know what, we will let you out of the contract, give you your deposit back and call it a day. And, you know, it’s scary times. And we can talk a little bit about that more on the next segment.

Todd Veinotte: [00:13:20.29] Yeah, I want to definitely get more into that. So let’s do that. And all the complexities of lending for renovations and all its sounds fair?

[00:13:27.79] Sounds great.

[00:13:28.79] Excellent. So it is Mortgage 101 with Clinton Wilkins, Your Guide to Homeownership, and myself, Todd Vienotte, right here on News 95.7. And we’ll be back with all of that.

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.