Mortgage 101 – Ready for Refinance

Do you know of all the different reasons why you should refinance your home? Clinton and Todd explore the reasons why more Canadians have decided to refinance their home. Todd shares his personal experience with refinancing, and Clinton gives some major advice.

Todd Veinotte
All right Mortgage 101 your guide to homeownership with Clinton Wilkins and myself Todd Veinotte!

What do you want to talk about?

Clinton Wilkins
I think we saved the best for last, I want to do a technical deep dive into how our refinance works. Okay, what is a refinance? First of all, a refinance is when we do a transaction and somebody has a mortgage already. Part of the reason that a consumer might want to do a refinance is one to maybe add a home equity line of credit, pay out some consumer debt, improve their property, do some renovations, or maybe they want to do it for investment purposes. We’re also seeing customers doing refinances to take longer amortizations. And for a variety of different reasons. And, you know, I think refinances are becoming more and more popular right now, in this rate environment, where consumers are coming out of a lower interest rate, and going into higher interest rates. We’re seeing a lot of refinances.

Todd Veinotte
So a refinance can be daunting to some, right? Obviously, because it’s a lot of work.

Clinton Wilkins
And I think there’s a negative stigma around refinancing. People just want to get a mortgage, and then pay it for 25 or 30 years and then be done with it. That’s kind of an old school way of thinking. And I think those consumers oftentimes pay a higher interest rate or higher cost of borrowing over their lifetime. Because oftentimes, they’re just renewing with their existing lender. And sometimes they have a lot of other consumer debt, that is not being leveraged. Oftentimes, people do renovations of their home, and they try to self finance them, like lines of credit and credit cards and stuff like that. And I always say that anything involved with a home should be financed by the home.

Todd Veinotte
Well, I can say this as I’m a client of yours,

Clinton Wilkins
We won’t breach anybody’s privacy.You can share your story.

Todd Veinotte
I bought a home before the market boomed. I was lucky at the time; single income and modest income at the time. And bought a home, thanks, you persuaded me to do that. You twisted my arm, the market boomed. The value of the house went way up, there was tons of equity in the house, probably 3x, maybe more. It needed quite a bit of work. And we refinanced that and I did all of that work, I still have a very low mortgage. But all the equity has gone into that house. And I didn’t have to use a line of credit. I didn’t have none of that it was all done through refinance.

Clinton Wilkins
And even though you owe more now than you did when you bought it, the amount of equity that you have is huge, huge, huge. And I think that’s what people forget when they refinance specifically for renovations, right? Yes, you may increase what you owe, but your property is going to go up exponentially. So the amount of equity you have is actually going to be more, even though you owe more.

The key is when you get the money because I was given the money, you got to spend it wisely. I could have went out and bought a car or something.

Some people do. And that’s why people refinance for all kinds of different reasons. And I think it’s refinancing for the right reasons. Refinancing for your lifestyle, probably not the right reason, unless you made some bad financial decisions, and you need to clean up your situation. But don’t do that. You know, there’s some repeat offenders, I always call them that. They really are refinancing every year and using their home as an ATM. Well, that’s really going to dry up here, because we’re not seeing the property values go up as exponentially as we were before. But let me tell you, if you bought a house before 2020, your house is worth a lot more today than it was back then.

Todd Veinotte
That’s exactly the scenario that I was in.

Clinton Wilkins
Seeing consumers that are even buying homes at 5% down back in 2019 that are able to refinance now, and really either do a home equity line of credit, or pull out a significant amount of equity to do the projects that they need, whether it’s renovation debts, sometimes it’s just adding a home equity line of credit or just restructuring their situation. So it’s very interesting. And everybody’s situation is different. Some consumers when they do a refinance, need to do a refinance for whatever reason, things change in people’s lives; divorce, maybe indebtedness, change of job, whatever they need to refinance. There’s other people who want to refinance. And I think those consumers typically will do the refinance when their mortgage is up for renewal. We can secure an approval 120 days before that mortgage actually funds. So we’re doing mortgages right now that are going to fund in October, believe it or not. That seems like a long time away but October is four months away from today.

Todd Veinotte
Yeah, yeah. And also, I think people need to understand there are a lot of logistics to refinancing and remortgaging.

Clinton Wilkins
Oftentimes an appraisal is needed, but that often is paid for depending on what lender you’re currently with, and what lender the work is going to be with. There’s lots of promos on the go, even right now. So some of the lenders will either cover the setup fee, in terms of the registration, discharge fee of the existing mortgage, appraisal, stuff like that. Oftentimes, depending on where your property is located, depending on what value we use; postal code, square footage. Sometimes it just goes through the automatic system, and no appraisal is required. I’m doing less appraisals today than I ever have. But it really just depends, I think the ones that are getting appraised, for sure are the higher value ones. So you know, the ones over $600,000, those are probably getting an appraisal. I think the ones that are getting the appraisals are also the ones that are in more rural areas. So if your postal code is like B0… in Nova Scotia, you’re on a rural route.

Todd Veinotte
Is that a risk factor the bank has to consider?

Clinton Wilkins
It takes longer to sell property in those areas, that’s just reality. Yes, all properties in Nova Scotia are selling at a pretty rapid pace. But in the more rural areas, I think they do take a longer time to sell. And when we’re talking about even alternative lending, we all do alternative lending for purchases and refinances. Typically, those transactions we do in the more urban areas. I’m not saying that we don’t do properties that are on well, and septic. But, primarily the ones that we do the alternative lending on, are on city surfaces. So, they are on city water, city sewer.

Todd Veinotte
But like we’ve talked about, make sure people if you have your documents all in place, your NOA, all of that stuff. If you’re going to refinance, you’re basically qualifying for a new mortgage, right?

Clinton Wilkins
Yeah, even when we do a transfer for renewal, we do a refi, we do a purchase, we do an equity take out, it’s really all the same type of qualification. We look at the income, we look at the assets, and we look at the credit. And based on that scenario, it’ll depend on which lender we go to products, all these things. But the lenders looking at the same things, they want to make sure that the amount of risk that they’re going to take on is going to be worth it for their amount of return.

Todd Veinotte
Anything on, before we run out of time, new builds? What can you tell us about what’s happening there?

Clinton Wilkins
I think there’s still a lot of new builds going on. There was a lot of positive news coming out of the federal government to really incentivize builders, and really consumers to buy new construction. So starting in August, the 30 year amortization for a higher ratio insured purchase, for first time homebuyer, for newly constructed properties is coming out. We’re gonna be talking a lot about that coming up this summer. And I think we’re gonna see a lot more new construction going into 2025. The federal government is really on it to create really millions of new units for Canadians. We need it here in Halifax. And really, these units are needed across the country, and all types of homes. I’m not just saying million dollar properties. We need starter homes, we need townhomes, we need condos, we need apartments, we need housing of all shapes and sizes, here in Halifax and really across the country.

Todd Veinotte
Indeed, and again, new builds are not for everybody, right?

Clinton Wilkins
Not for everyone, it can come with some additional risks. You think new is safer, but new isn’t always safer, depending on what happens with the builder as well as the cost of construction. You know, the materials situation really in that pandemic was really tough for the builders. Things took a long time. I always say that resale homes are safer because someone else has worked out the problem. And you know, you’re getting an inspection, you know more on what you’re getting sometimes and pros and cons to both and there’s personal preferences out there.

Todd Veinotte
Okay, what’s the best way for people to get a hold of us?

Clinton Wilkins
Check us out online at Teamclinton.ca/radio. Hundreds of blog posts on there, we have a mortgage calculator. We have a secure online portal for online applications and links to all our social media. You can see us on Facebook, Instagram, TikTok, we’re on all the media. We do some really good real estate, see what Todd and I look like, and we break the show into little little snippets so you can always listen to us down the road.

Todd Veinotte
So I hope you had a good time!

Clinton Wilkins
I thought it was great! We’re in a new studio. So if you’re watching hats off to our team here at Podstarter, and I hope that we sound great on your airwaves or wherever you are listening to our show.

Todd Veinotte
All right that’s Clinton Wilkins or mortgage guru I’m Todd Veinotte, its Mortgage 101 your guide to homeownership. Thanks so much for tuning in and listening!