Mortgage 101 – refinance for renovations | April 2021 Part 4

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on News 95.7, the guys talk about refinance for renovations, self-employed borrowers, pool renovations, and amortization.

Mortgage 101 with Clinton Wilkins & Todd Veinotte – April 2021 – Part 4

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

Transcript:

Welcome back to Mortgage 101!

Todd Veinotte: [00:00:15:26] That’s real, Lady Gaga right there.

Clinton Wilkins: [00:00:17:14] This is the real, real deal.

Todd Veinotte: [00:00:19:00] Yeah, not like that other thing that you played.

Clinton Wilkins: [00:00:21:05] You know, this is circa December 2009.

Todd Veinotte: [00:00:25:15] I know eh?

Clinton Wilkins: [00:00:26:22] Wow.

Todd Veinotte: [00:00:27:08] You feeling old?

Clinton Wilkins: [00:00:28:05] Nah, I feel young. I think I feel younger now than I ever have been.

Todd Veinotte: [00:00:31:29] Oh, my goodness.

Clinton Wilkins: [00:00:32:25] I feel like I am like Benjamin Button.

Todd Veinotte: [00:00:36:00] Okay.

Clinton Wilkins: [00:00:36:10] Every year that goes by, I keep on getting younger and younger, you know?

Todd Veinotte: [00:00:39:19] Okay, so there’s somebody else like that? They’re more immature. Who’s that? Never grows up. I don’t know whatever. Is that you?

Clinton Wilkins: [00:00:50:04] I hope not.

“Get your taxes done.”

Todd Veinotte: [00:00:51:24] Okay. Anyway, welcome back to Mortgage 101 Your Guide to Homeownership with Clinton. Wilkins, right there. Myself Todd Veinotte. Right here on News 95.7. I quickly wanted to mention just to kind of put a pin on the, or to finish off that pre-approval conversation. If you don’t have your taxes done, you’re probably, that’s the first thing, right. You got to get taxes done.

Clinton Wilkins: [00:01:12:10] If you’re self-employed, you really need your taxes done. If you’re a normal, you know, employed human might be okay with no taxes done. But here is my word of advice. Because of everything that happened with COVID and CERB and everything else, lenders are asking for more and more confirmation of people’s income tax being filed on time and confirmation you don’t owe income tax. So that word advice is the deadline here is in about three weeks. Get your taxes done. Yeah, the end. And, you know, even if you owe get your taxes done, you can set up a plan with them. But if you do owe income tax, you have to pay the income tax off before you can buy a house.

Todd Veinotte: [00:02:00:08] Or you do eh?

Clinton Wilkins: [00:02:01:03] You do.

Todd Veinotte: [00:02:01:13] Okay, excellent.

Clinton Wilkins: [00:02:03:10] Because CRA is a preferred creditor. And CRA, if you do owe income tax, can actually go in front of the mortgage and the bank doesn’t like that they want to make sure they’re in first position. Right? And also, if you’re self-employed, we don’t know how much income tax you may or may not owe. You know, I think some self-employed people owe tens of thousands, hundreds of thousands of dollars. So they need to make sure that that is paid before you are buying, refinancing, renewing your mortgage.

Todd Veinotte: [00:02:33:17] Yeah. Then you get into owing, paying GST and all that stuff.

Self-employed borrowers

Clinton Wilkins: [00:02:36:23] Etcetera, etcetera. Yeah. It adds up, you know, it’s the joys of self-employment. And, you know, I think it does take a little bit of thick skin to be self-employed. You know, I’m self-employed. I understand how that works. And I think it’s risk and reward. You know, when you’re self-employed, you know what the joy is? If I need more money, I can just work a little harder. I think when you’re employed with, like, a salary, it doesn’t matter how hard or not hard you work. Obviously, probably if you’re not working that hard, you’re probably not going to have a job in this market, but you’re probably not making any more money, really. So, you know, the way that I look at it when I see self-employed borrowers, I love seeing them because I think that we can add a lot of value. And usually self-employed borrowers are really loyal to us because, you know, we’re able to hold our hand, get them into a home or get them refinanced or renewed it or whatever. And sometimes if they walk to maybe another lender, they’re not as motivated to help them because they feel that self-employed borrowers are more complicated.

Refinancing for renovations

Todd Veinotte: [00:03:35:05] Okay, you wanted to, before we ran out of time we wanted to get to, I think it was refinance?

Clinton Wilkins: [00:03:39:08] Yeah. I want to talk a little bit about refinances. We are seeing many, many more requests for refinances now than we have before. I think one of the big reasons are the value of people’s homes are up. When you refinance, you can refinance up to 80 per cent of the market value of the home. So, for example, if the home is worth $400,000, you can refinance up to $320,000. From that $320,000 you need to pay off your existing mortgage and or secured line of credit. And then the proceeds from that refinance, you can use that money maybe to clean up some other unsecured debt. But many borrowers are coming in to see us to do this refinance, to get equity out, to do renovations. And I think renovations are certainly a hot topic right now, especially where the prices have really gone up. Maybe it’s about perfecting the house that you’re in or, you know, making that house more suitable to your needs. And I think more and more borrowers are looking at doing refinance for renovation purposes.

Todd Veinotte: [00:04:37:12] I think, though, that people before they do that, they need to if they’re not already educated on the cost of building material, they should. Because building materials are incredibly expensive right now.

Clinton Wilkins: [00:04:48:08] Yeah. And I don’t know the economics of the building materials, but I can tell you it’s been high for a while. And, you know, until some of these lumber issues may be correct themselves and until there’s more supply in the market, I think the cost of building materials is going to be high for a while.

Todd Veinotte: [00:05:04:23] Right. So what do you recommend when it comes to that? And so people doing what they need, should they hire a contractor? Because sometimes people do it themselves and they run into problems there. What are your recommendations?

Clinton Wilkins: [00:05:16:11] I think getting a quote from a contractor is really important, then you know how much, you know, the cost of your renovations are going to be. So when we do the new mortgage, you know that you have enough money to pay for the renovations. That’s kind of important, unless you have other unsecured credit or cash that you may or may not be able to leverage. So I think knowing what the costs in the scope of the work is, is super important. But, you know, when we’re talking about renovations, sometimes borrowers, when they’re buying a home, you know, renovations can be a great solution there too.

Pools — increase or decrease home value?

Todd Veinotte: [00:05:45:00] Putting in something like pools and amenities like that, that sometimes, it doesn’t increase value? It might actually decrease the value.

Clinton Wilkins: [00:05:53:20] Yeah. And I think sometimes pools might not be the best solution. You know, I think pool sales probably have gone through the roof with COVID. I can tell you last summer, anybody who had a pool is probably like the most popular person on their street. But, you know, pools come with a significant cost to operate and not every homebuyer wants to have a pool. So I think when you’re doing a refinance and if you’re looking at putting a pool in, it needs to be a pool for you, not a pool to increase the value of your home.

Todd Veinotte: [00:06:25:26] What about going to expanding property, an extension out back or whatever, something more intense like that? Do you, how often you see that?

Clinton Wilkins: [00:06:34:16] I mean, we see that quite often. Usually those borrowers, sometimes they’ve figured out how to get the renovations paid for kind of before they come and see us know often when it’s a big, big renovation like that will usually come in after the work is already done. And then we’ll do a refinance because normally after the work is done, the property’s worth more then they can really leverage that as improved value and go up to 80 per cent of the market value of what that looks like at that time.

Amortization

Todd Veinotte: [00:07:00:07] So when you’re refinancing, basically, you have to, you’re qualifying for another, for a new mortgage, right?

Clinton Wilkins: [00:07:04:24] Yeah, it’s a new mortgage. And, you know, some borrowers think you’re like, well, I’m starting a new mortgage again and all the interest is front loaded. It has nothing to do with you getting a new mortgage. It really has to do with what the amortization is on the mortgage that you have. So some borrowers come in to see us. They start out at a 25 or a 30 year amortization. If they want to do a refinance and think the rates are low, let’s do a 20 year amortization, let’s do a 16 year amortization, and we can really look at that amortization and figure out your risk tolerance in terms of your payments and really work with you to figure out how much you can afford to pay down. And I think it’s a really important time to look at that. You know, some borrowers are okay not paying their mortgage down so aggressively because the rates are low. But I think the borrowers who really want to get debt free now is a great time. Pay it down where you can. So, you know, I think leveraging some of that advice is super important as well.

Todd Veinotte: [00:07:56:10] All right, so again, if people are thinking of selling, just to kind of recap what we’ve talked about, now is an amazing time to sell your property.

Clinton Wilkins: [00:08:05:16] Now’s a great time to list your home for sale. We’re seeing a lot of people who are selling their existing home and then buying new construction. That might involve being homeless. Well, I think you can probably figure it out for a few months, especially if it enables you to get into a new construction home at a fair price. I think it’s less competitive when there’s new construction. You know, they’re not seeing those 20 offers that there are for some of this resale property. But if you’re selling an existing home, chances are you’re selling that for top dollar. So I think it’s a great time to sell and buy new construction. I think it’s a great time to sell and maybe downsize your house. And I think it’s a great time to sell and maybe upsize. It just depends on what your situation is. And, you know, I don’t think the prices are going to go down. It’s supply and demand. And there’s more and more borrowers out there on the marketplace because there’s more and more residents here in Halifax. You know, I think if you’re a first-time homebuyer, now is a great time to look at getting into the market, because I think in a couple of years it may be even less attainable than it is now. So I think if you’re kind of on the edge of making something happen, if you can get it together, now is a great time to look at that.

“Another one in the book, eh?”

Todd Veinotte: [00:09:14:18] Again, what’s the best way for people to get a hold of you guys?

Clinton Wilkins: [00:09:16:27] You know the first place for people to look is really online. Check us out at TeamClinton.ca. Lots of great information there. And, you know, we’ve an office in downtown Dartmouth and in downtown Halifax to serve residents of Halifax and across Atlantic Canada. And you know what? We’re moving people from across the country here. So it’s super exciting. You know, we love what we do every day and, you know, we really love helping people. So lots of great information on our site. And if you do have a quick question, certainly drop us a message. We have a form right on our website. Shoot us an email. We’d love to help and we love to share our expert advice.

Todd Veinotte: [00:09:51:11] Thanks. Clinton, another one in the book, eh?

Clinton Wilkins: [00:09:53:00] Another one in the books and we’ll be back next month.

Todd Veinotte: [00:09:55:11] You got it. That’s Mortgage 101, Your Guide to Homeownership with Clinton Wilkins. Again, check them out online. TeamClinton.ca. And myself, Todd Veinotte. We’ll be back next month. We do this each and every month on News 95.7. We’ll see you next time, folks.

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.