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Mortgage 101 – renewals and home plus improvements | March 2021

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on News 95.7, the guys take a deep dive into mortgage renewals, home plus improvements, buying and selling in a hot market, and so much more!

Mortgage 101 with Clinton Wilkins & Todd Veinotte – March 2021

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

Transcript:

Welcome back to Mortgage 101!

Todd Veinotte: [00:00:12.13] Hey, welcome to Mortgage 101, Your Guide to Homeownership with myself Todd Veinotte, and the one and only Clinton Wilkins. Clinton Wilkins what is up today listening to the tragically hip.

Clinton Wilkins: [00:00:23.44] You know who doesn’t like the Hip. And you know, it’s the weekend. So happy weekend, everybody. And thanks for tuning in.

Todd Veinotte: [00:00:29.77] Yeah, we’re happy to be here on News 95.7 and again, just a wonderful Saturday or if you’re listening on Sunday as well. Yeah, we’re back to back.

Clinton Wilkins: [00:00:38.71] It’s the weekend.

Todd Veinotte: [00:00:39.79] Do you take time off in the weekend or do you work all the time, steady constantly?

Clinton Wilkins: [00:00:43.06] You know what? I don’t see any clients on the weekend. And you know, that gives me a little bit of a break. You know, during the week I sometimes I’m working like 15 hours a day plus. So on the weekend, it’s a good chance for me to reset. And, you know, I’m a kind of a weekend warrior, so I do everything on the weekend and I really focus on work during the week.

Todd Veinotte: [00:01:02.56] You work 15 hours a day? I don’t believe that. But that’s, that’s simply not true.

Clinton Wilkins: [00:01:07.39] Not everyday, but there are many days I work 15 hours a day. Usually I start somewhere around 7 a.m. at home. And then I get to the office 9, 9:30, 10 a.m. and I start to see my first clients at 10 a.m. and I’m often at the office until about 7 p.m., go home, you know, maybe I’ll do my yoga or my workout, have dinner and then I’m on my computer again. So I’m certainly logging a lot of hours and I think it’s just a recipe of what’s going on here in this market. Spring is right around the corner. And, you know, during the show, we’re going to talk about springing into homeownership. I know it’s certainly a hot topic here for our listeners and the people that live here in Halifax and across Atlantic Canada. It’s an exciting time and I think there’s a lot going on.

Todd Veinotte: [00:01:49.48] If I asked the producer of the show, Jonathan Snow, to verify these hours that you suggest that you have, would he back that up? I’ll look over right now.

Clinton Wilkins: [00:01:58.52] I’m sure he would give us a thumbs up. He knows. Oh,

Todd Veinotte: [00:02:02.59] It’s halfway.

Clinton Wilkins: [00:02:03.31] It’s a half thumb. I don’t know.

Clinton Wilkins: [00:02:05.89] He’s the truth barometer.

Clinton Wilkins: [00:02:08.95] Well he knows because he’s getting these emails from me at all hours.

Todd Veinotte: [00:02:13.99] Does he work for you? Or is he a subordinate of yours?

Clinton Wilkins: [00:02:16.39] So Jonathan is basically, you know, a subcontractor.

Todd Veinotte: [00:02:19.66] But can you order him around?

Clinton Wilkins: [00:02:21.31] I mean, I don’t know if he will accept the orders, but I try.

Todd Veinotte: [00:02:27.28] All right. So we are absolutely happy, though, to be on the air and enlightening people about these important, this is an important topic, Right? And you’re very passionate about this. Everybody knows that you are. Oh, by the way, we should mention that you’ve done some other media throughout the week, right?

Clinton Wilkins: [00:02:43.90] Yeah. We did some work with CTV earlier this week and a couple weeks ago, we were actually on some community radio as well. So we’re certainly doing a lot. And it’s all really ties into education and awareness. And I think that’s just so important to, you know, when a consumer buys a home, it’s the biggest purchase of your life and the mortgage is the biggest debt. We want to make sure you’re protected. We’re really biased to the consumer at the end of the day. And we think that we basically lend them to the lender for the period of the term. And, you know, about 60 per cent of our transactions that we do everyday are repeat clients. I think that really just speaks to the level of experience. And, you know, the clients believe in us and they’re coming back.

What does Clinton Wilkins Mortgage Team do?

Todd Veinotte: [00:03:26.11] Right. So for people who are just tuning in and not heard this segment, there’ll be a lot of new listeners. Tell everybody a bit about your business, what you do some your background, because, again, could be repeats for some people, but for some there hearing this for the first time.

Clinton Wilkins: [00:03:40.09] I’m Clinton Wilkins and I’m a mortgage broker in Dartmouth. And we have an office in Halifax. And I’ve been in this industry for 15 years. You know, I really believe in mortgage lending. I believe that mortgage brokers are the best choice because they’re unbiased. And, you know, we’ve access to about 40 different lenders. And the really neat thing about our office is we basically run it like a bank branch. You know, we have two offices and we have about 11 people who work here. And, you know, the one thing that really differentiates us from other lenders is we’re answering the phone and we’re also in the relationship business, as you know, you know, at the bank branch level and the credit unions, there’s a lot of turnover. And, you know, you don’t have the relationship that you once had. And I think that’s really what differentiates us from, you know, our competitors.

Todd Veinotte: [00:04:25.54] You say you’ve got 40 different lenders, do you have people approaching you, lenders saying that’s probably a regular thing and people wanting you to move their money around?

Clinton Wilkins: [00:04:35.53] Yeah, we have lenders that knock on our door every day. You know, we’ve our preferred, you know, five or six that we use all the time. And you know what? The relationship is really important for us because we’re able to get better service from these lenders as well as, you know, usually a little bit of a better rate for the consumer. So, you know, it’s a little bit like Costco, for example, but we’re Costco that only sells toilet paper. So, you know, we’re experts in just doing that one thing. And, you know, it’s really about providing the best unbiased advice to the consumer.

Are there local lenders?

Todd Veinotte: [00:05:10.24] Ok, of those of those lenders, how many would be local?

Clinton Wilkins: [00:05:17.02] You know, some of the lenders do have local underwriting. There’s two or three that we use that, you know, do all the underwriting here in Halifax and surrounding areas. Majority of mortgage lenders in Canada, all the underwriting is done in Ontario. But the couple of the ones that we use every day are all underwritten here, which I think is really super cool because they understand what the challenges are. They understand what the areas are. They understand, you know, the employers and how real estate works in Nova Scotia. But regardless of what lender we use, having us as the advocate, I think makes all the difference because we’re able to look at the income, the assets in the credit and really put these files together. Every single file is kind of like a snowflake and every consumer is like a snowflake. The situation is different. So, you know, we’re able to put that together and really find the best solution.

Todd Veinotte: [00:06:08.74] Would it be safe to say that local lenders would generally have higher interest rates or no?

Clinton Wilkins: [00:06:14.74] Not necessarily, no. So just think, what about the Bank of Nova Scotia? They’re one of the biggest lenders in the country in the mortgage space, and they’re one of our top partners. So we’re doing business with lenders like Scotiabank everyday. And Scotiabank has a local underwriting here, which is really super, super neat.

Todd Veinotte: [00:06:32.56] They can make decisions right here.

Clinton Wilkins: [00:06:34.15] Right here. The decisions are being made everyday, right out of Nova Scotia for our files, which is really, really cool. And, you know, they’re a great partner of ours. And there’s other lenders that we that we use that have local underwriting here, like Home Trust and a bunch of credit union partners that we use.

Todd Veinotte: [00:06:52.84] Okay, has it happened because this is part of, I think you’re all choked up.

Clinton Wilkins: [00:06:58.72] I’m choked up. I’m just like, so excited about mortgage lending.

Todd Veinotte: [00:07:04.69] Okay.

Clinton Wilkins: [00:07:04.75] I can talk about mortgage lending all day, every day, so like,

Pushing back at rejections

Todd Veinotte: [00:07:07.15] We know. We know, which is great. So, have you ever pushed back on a no, on rejection? Do you push back?

Clinton Wilkins: [00:07:14.95] I mean, everyday. Everyday, you know. You know, and I don’t think it’s necessary about fighting. And we don’t get a lot of no’s because we know how to package these transactions. So usually it’s always the path to yes, but, you know, no’s do happen for a variety of reasons. But, you know, if we need to escalate something, we will. And sometimes it’s just about taking that feedback from that first lender that might not be willing to do it and then sending it to another lender. But that’s the joys of working with a mortgage broker, it’s you know, we’re not just sending this to one lender. We can send this to multiple lenders if we need to. And if we believe and we think it’s going to be something that we can do, we get her done because, you know, at the end of the day, we don’t get paid unless we fund the mortgage. So, you know, we are motivated. And that’s the difference between working with someone who’s on a salary, because at the end of the day, if they fund it, if they don’t fund it, whatever. With us, you know, we are in it with the customer. And I think that’s why we’re such a great partner to have.

Todd Veinotte: [00:08:09.70] Okay, so just so that people understand again and kind of want to drive this home. There are new people listening all the time. So, people if there have been a bank customer, one of the big, big banks in Canada all their life, their parents have been traditionally just go there. That’s what they normally do. What, why, how potentially could cost them lots of money just by simply relying and trusting that that bank that one standalone bank that they’ve gone through all their life, perhaps.

Clinton Wilkins: [00:08:39.34] There’s a lot of differences between lenders. I think that’s one of the big things. And not every file works with every lender. That’s just a reality. You know, maybe it’s something with income, maybe something with assets, maybe it’s something with credit. Every lender has different programs, which I think is important to remember, but also the risk appetite is different and it changes and the rates are really different from lender to lender. So, you know, that’s why we’re able to package it and figure out what the best solution is. And sometimes it’s not just about rate. Sometimes the lowest rate is not the best rate for the customer. And you know,

Lowest rate vs the best rate

Todd Veinotte: [00:09:15.97] Why is that?

Clinton Wilkins: [00:09:17.38] You know, sometimes if you take some of these low rate products, it, you have to give up some of the features of the mortgage. And that can be very restrictive.

Todd Veinotte: [00:09:25.89] Such as?

Clinton Wilkins: [00:09:26.76] Portability, the ability to break the mortgage early without a bona fide sale, like maybe you need to refinance mid-term, I don’t know. Also sometimes it eliminates things like prepayment privilege. You know consumers should have the right to pay down their mortgage faster if they want. And I think that it’s all about protecting the consumer. We don’t know what’s going to happen. A lot of things change in people’s lives, you know, financial issues, health issues, marital breakdown. And sometimes if a customer gets one of these no-frills type products, it can be very costly to get out. And sometimes the lender will not allow you to pay them out early unless you sell the home.

Todd Veinotte: [00:10:04.83] Okay, so we’ve got lots to get to over the, leading in the next 50 minutes or whatever we’ve got left. We’re going to talk about early renewal. We’re going to get into mid-term refinance and purchase plus improvements. That’s something that people really need to know a lot about. So, did I miss anything?

Clinton Wilkins: [00:10:21.24] That is perfect. And we’ll continue talking about spring.

Todd Veinotte: [00:10:24.18] We’ll continue to talk about spring. So, again, it’s Mortgage 101 Your Guide to Homeownership with Clinton Wilkins and myself. And again, we’re going to get into early renewal, mid-term refinance, purchase plus improvements, plus some more to reight, Clinton?

Let us know on social if you have song requests for Mortgage 101

Clinton Wilkins: [00:10:36.12] Some more good music coming out.

Todd Veinotte: [00:10:38.04] All right. We’ll be right back.

Todd Veinotte: [00:10:51.83] All right, Mortgage 101 Your Guide to Homeownership here on News 95.7 with Clinton Wilkins and myself, Todd Veinotte, who were mellow yellow this morning.

Clinton Wilkins: [00:11:00.59] I know, we’re going to have to get like our really upbeat song here later on in the show. So you’ll have to stay tuned in and see what our next one,

Todd Veinotte: [00:11:08.48] I think you’re going to, I think you’re going to bring it.

Clinton Wilkins: [00:11:10.31] I think want to bring it. I think I have some good choices. I actually did a little callout on Facebook the other day.

Todd Veinotte: [00:11:14.78] I saw that.

Clinton Wilkins: [00:11:15.74] About what type of music people wanted to hear.

Todd Veinotte: [00:11:19.16] Are you going to honour the request?

Clinton Wilkins: [00:11:22.16] I think that we can certainly honour some of these. I think that, you know, there’s some that I might enjoy more than maybe the listeners might enjoy. Who knows.

Todd Veinotte: [00:11:30.53] Maybe you might enlighten somebody with your sensibilities.

Clinton Wilkins: [00:11:33.89] Yeah, exactly. And if somebody wants to send us a tweet, you know, send us a tweet. And on the next show, we’ll certainly play your favourite song.

Todd Veinotte: [00:11:41.01] We’ll certainly choose to ignore it.

Clinton Wilkins: [00:11:42.77] Well, or, you know, if we really like it, I mean, I think we can probably squeeze it. I mean.

Renewals and early renewals

Todd Veinotte: [00:11:46.07] There you go. So your Guide to Homeownership, as mentioned and we’re talking spring into homeownership. It’s a spring market. We’re going to talk about listing later in the show and some other things. But first, we want to get to renewals and early renewals for those who don’t understand about renewals and how an early renewal might be advantageous. Let’s just get into that first.

Clinton Wilkins: [00:12:08.42] The way that a renewal works is oftentimes when we get involved, we consider it a transfer or switch. And usually we are taking a borrower out of one lender and into another lender. And through that process, we basically present this client as a new customer to that lender. And usually new customers get better rates than existing customers. It’s just the way that banks work, similar to the way that a cell phone company works. Yes, new customers get better rates than existing customers. So when we get involved at that renewal process, we’re able to do things like that. We’re getting a lot of requests from customers to do early renewals. Rates are really at all time lows. So the way that an early renewal would work, you would have a penalty coming out of your existing product and that would either be three months interest or an interest rate differential, which is ever higher. Normally what we do is we do a bit of a calculation to see if it’s going to make sense and we can capitalize up to $3,000 at that penalty on the new mortgage, still with this renewal process. So it’s a good solution for a lot of customers. You know, we’ve seen a little bit of spike in the in the fixed rates in the last couple of days. And last week or so, the bond yields have been getting better. So the fixed rates have increased a little bit. But consequently, the variable rates are basically down to the spreads that they were before COVID hit a year ago. So, pre March of last year, a really good variable rate was somewhere around prime minus 100 basis points. And now we’re seeing rates at prime minus 100 and maybe even a little bit better, like prime minus 105. The exciting part is prime is much lower than what it was.

Todd Veinotte: [00:13:54.56] I mean, you’re using vernacular here. You know what it means. But for those who don’t know what price means.

Clinton Wilkins: [00:14:00.29] The bank prime for most lenders today is 2.45.

Todd Veinotte: [00:14:03.47] Prime lending rate. Why do they call it prime?

Clinton Wilkins: [00:14:06.50] That’s the rate that the banks use to, you know, lend everything. So either you borrow something at prime, it could be prime, something below prime, it could be above prime. But that’s a rate that floats and it’s connected to the key overnight rate that the Bank of Canada sets eight times a year when they do their meetings. So, you know, we are big believers in a variable rate mortgage product. You know, I think that’s a great solution for many customers. It’s not right for everybody, but for a lot of people, it is the right solution. The reason a variable, you know, sometimes is so strong is you can break it any time with only three months interest. So we know what the penalty would be to get out of that term early, but it gives you the flexibility to lock it into a fixed rate at any time with no cost. So more and more consumers are considering this variable rate product. I can tell you the consumers that we did a variable rate before COVID hit are very happy with me because oftentimes they have that price minus 100 or so and we’re prime 2.45. Those customers today have rates at 1.45, 1.40. And really, you know, that’s almost rock bottom. So more and more consumers are thinking about variable today than they were maybe even a couple of weeks ago just because the fixed rates have gone up, but the variable has gone down.

Mortgage rate stress test

Todd Veinotte: [00:15:29.34] Okay, one of the I guess, issues with these low, low interest rates is people get into a mortgage that works in their payment now, but the rates good will go up. We know that. So five, six, seven years out, this ties in with people’s ability to pay and the stress test.

Clinton Wilkins: [00:15:51.09] That’s right.

Todd Veinotte: [00:15:51.63] So can you get into that a little bit, why that’s federally regulated, but why, that’s why that’s good for the consumer, I guess.

Clinton Wilkins: [00:15:58.95] Want to know that if the rates do go up, so if your variable rate goes up, but what happens when your fixed rate comes up for renewal? The rates could be higher. So the way that we qualify a consumer today is based on the five-year posted rate from the Bank of Canada. So today we’re qualifying consumers on 4.79 per cent. Do we think the rates are going to get to 4.79 per cent in five years? I think it’s highly unlikely, but that’s what the federal government makes every consumer get qualified at. So we know you can afford your mortgage at a higher rate. And you know, the one thing about the variable and I just want to circle back to this a little bit. We sent an email and now we’re sending SMS to our clients who are in a variable rate. We watch the rates and we can give the feedback to customers if we think they should make a change. And we have we’ve actually called a bunch of our customers over the last couple of years that we can give them a better rate, whether that’s a better fixed rate or better variable rate. And we’re able to do some of these midterm renewals and save customers really thousands of dollars and capitalize that penalty. But it’s not just renewals that customers might want to do early. Maybe they want to look at a refinance. And we’re getting many more requests for refinances this year than we did last year. And I think one of the key reasons is the values are up in Halifax and really across Canada. The values are up. And when you refinance, you can refinance up to 80 per cent of the market value of your home. And if the home values up, that means that you can access more equity in your home, less your existing mortgage and or secure lines of credit,

Todd Veinotte: [00:17:49.29] You’re jumping the gun on me here with segments. I want to talk about that after.

Clinton Wilkins: [00:17:53.49] It’s all good. Will circle back to that.

Renewal offers

Todd Veinotte: [00:17:55.35] Right. But I think there’s more to drill down into the renewal process. So one of the disadvantages, I guess, if you wanted to use the term or barriers to shopping around at renewal oftentimes is people may have job changes, income changes, a lot of people have gone through that with COVID. And so they may be reticent to do that because of these reasons. They said, look, I just want to refinance or just renew with the bank. They’re offering me a rate. It might be a little higher than I want, but so what advice do you give people?

Clinton Wilkins: [00:18:30.66] Yeah, that does happen. And sometimes we give the advice, the consumer, to say, hey, renew with your existing lender. Maybe you just want to take a one year fixed until your situation, you know, might be in a position that you can transfer out or maybe get that refinance that you really want to do. We do give that feedback all the time, because when you change lenders, whether that’s a refinance, whether that’s a renewal, if you’re changing lenders, you need to requalify. So we’re looking at the income, we’re looking at the assets and we’re looking at the credit. Most lenders nine times out of 10, maybe 99 times out of 100 are going to offer the consumer a renewal. The only times that they don’t necessarily offer a customer renewal when the term comes up, if they’ve had maybe some credit issues during the term and maybe they’re not comfortable with offering a renewal or maybe the repayment on the mortgage wasn’t what they want, there are some reasons why they might not offer a renewal or maybe they’re no longer lending. Sometimes it happens that lenders shut down or get acquired or merged or whatever. And, you know, whoever takes it over may not be interested and continue doing that business. And they require that mortgage be paid out. Normally in those type of situations, we really do need to get involved and figure out what the best solution is going to be for that customer. And in some cases, the customer chooses that they want to sell their home.

Todd Veinotte: [00:19:59.48] And it doesn’t hurt if people get a renewal letter to have a consultation with you. Right?

Clinton Wilkins: [00:20:04.52] I would say it never hurts. It never hurts. And many of these times we can save the customer money because when these renewal offers go out from their existing lenders, usually they’re at much higher rates than what are available out there in the marketplace.

Todd Veinotte: [00:20:22.58] Ok, so coming up after the break. Guess what we’re going to talk about.

Clinton Wilkins: [00:20:26.60] Uh, I don’t know, maybe some refinance?

Todd Veinotte: [00:20:29.03] Purchase plus, you wanted to, you were very enthusiastic about talking about that.

Clinton Wilkins: [00:20:35.36] Well, I’m excited about it because purchase plus improvements is certainly a hot topic. It’s very important for anybody who’s looking at buying a home.

Todd Veinotte: [00:20:43.70] Ok, we’ll be right back to talk about that on News 95.7, Mortgage 101 Your Guide to Homeownership will be back.

Timmins, Ontario

Clinton Wilkins: [00:20:53.16] As he shakes his head.

Todd Veinotte: [00:20:54.54] What are you doing?

Clinton Wilkins: [00:20:56.79] See, isn’t this a good one?

Todd Veinotte: [00:20:59.01] Yeah, it’s good, but I don’t know. Let’s go, girls? Thought we were guys.

Clinton Wilkins: [00:21:04.38] I know. But I think there’s probably a lot of ladies listening.

Todd Veinotte: [00:21:07.56] There are a lot of ladies listening. But you and I are chatting.

Clinton Wilkins: [00:21:10.44] Well you know what? We have to keep everyone interested. And this was one of the requests from our listeners. They wanted to hear a little Shania Twain. I thought what better song to hear on the weekend, really.

Todd Veinotte: [00:21:22.17] Turn it up a little bit.

Todd Veinotte: [00:21:25.92] I like Shania Twain.

Clinton Wilkins: [00:21:26.88] Well, I think a lot of people do. Canadian, you know.

Todd Veinotte: [00:21:29.82] Timmins, Ontario.

Clinton Wilkins: [00:21:30.39] Timmins, Ontario. And you know what? We’re having a lot of people relocate here from Timmins and from all over Ontario because who wouldn’t want to be in Atlantic Canada and who wouldn’t want to be in Halifax?

Todd Veinotte: [00:21:43.71] Who would want to be in Timmins?

Clinton Wilkins: [00:21:45.12] I’m not sure. I’ve never been to Timmins. Have you been to Timmins?

Todd Veinotte: [00:21:47.67] No, and I don’t plan on it. But you never know. I might do a trans Canada tour someday.

Clinton Wilkins: [00:21:52.47] Maybe we could be live from across the country.

Todd Veinotte: [00:21:54.51] Who knows. All right, Mortgage 101, Your Guide to Homeownership with Clinton Wilkins, who you just heard chatting, talking. His voice. Chose that music, not me. And my name’s Todd Veinotte. Happy to be here on News 95.7 on the weekend. And we are getting into all types of good stuff here when it comes to mortgages. And there’s so much to unpackage. Purchase plus improvements must be one of the more complex components of your business, is it?

Purchase plus improvements

Clinton Wilkins: [00:22:19.02] We get requests for purchase plus improvements everyday. And I think it’s something that’s really important for consumers to think about when they’re buying a home. You know, the old adage, Todd, is, you know, buy the worst house in the best area and where the inventory is limited right now in Halifax and a lot of places across Atlantic Canada. Thinking about purchase plus improvements is really important. So I’m going to talk a little bit about how the logistics work and we’ll get into a little bit of that. So when you think about purchase plus improvements, we really need to have a quote from a contractor up front with your offer. And we would get the mortgage approved with the purchase, plus improvements all together in one package. And we can typically finance up to 20 per cent of that purchase price to a maximum of $40,000. And the way that it works is that all the funds are held back and you have 120 days to get the work done. And once the work is done and we verify that the work is done, then the funds get released to your lawyer.

Todd Veinotte: [00:23:23.74] Okay, so you must have to establish what, with your with the contractor? Then documentation, does this all work when it comes to them getting paid and them knowing they’re going to get paid?

Clinton Wilkins: [00:23:33.37] So sometimes, you know, the contractor will need verification from the lawyer that they’re going to get paid. Maybe there’s a direction to pay done and maybe the consumer has to do a deposit out of pocket and then the contractor gets paid the balance of what is due at the end. So maybe you have to have a little bit of skin in the game as well. Or maybe you might have to have some cash and credit bill to fund these renovations through the process. And then you basically get reimbursed once the work is completed.

Todd Veinotte: [00:24:01.87] All right. So if you’re going to use a line of credit and take $75,000 $100,000 off a line of credit before your mortgage closes, that changes the math does not?

Clinton Wilkins: [00:24:12.99] That certainly could make a difference. So normally when we have a purchase transaction on the go, we tell people and even through the pre-approval process, don’t change your job. Don’t go borrow any additional funds, don’t buy a new car. Don’t change anything. Continue making your payments. And if you’re going to borrow any money and if you need to use a line of credit or a credit card to fund up to these f$40,000 of renovations, do that after the mortgage closes because we don’t want to have any additional debt that we have to worry about debt servicing, because sometimes some of these files, the numbers are tight to begin with and more debt might mean no mortgage. So really, you need to be cognizant that you don’t want to start borrowing new money until after you take possession of the home.

Todd Veinotte: [00:25:04.09] Okay, but again, what if people need that money for the renovations? Maybe they’re doing the work themselves, right?

Clinton Wilkins: [00:25:09.49] You know, I think that everybody’s situation is a little bit different. And I think, you know, we can work through that process and figure out what you can afford. And maybe you need to hold on the renovations. Maybe you can’t afford them. And, you know, sometimes we do have those conversations. You know, customers do want to do purchase plus improvements, but they’re barely squeaking in to get into the home. So, you know, maybe that’s something that they need to fund out of pocket over time and they can’t finance any improvements. But I think that when we look at the numbers, we figure out really what you can afford and then work through the process.

Affording a home plus improvements

Todd Veinotte: [00:25:40.15] Okay, so just to be clear, you can’t say to the lender, oh, we want to do a $50,000 kitchen reno and bathroom reno, but we need the mortgage funded before we do that. You’re saying the work’s got to get done before,

Clinton Wilkins: [00:25:55.00] Before you get the money.

Todd Veinotte: [00:25:56.17] Before you get the money.

Todd Veinotte: [00:25:57.04] That’s right.

Clinton Wilkins: [00:25:57.43] Right. And there’s no there’s no way around that?

Clinton Wilkins: [00:25:59.38] There’s no way around that because the lenders aren’t going to just write a check carte blanche and just, like, believe you’re going to do it, you know what I mean? You know, there’s a lot of trust in mortgage lending. You know, we’re trusting you’re going to pay. We’re trusting that you’re still going to have the funds for your down payment on closing. But they’re not just going to write a blank check. And, you know, there’s some due diligence here because we want to insure and the lenders want to insure and the mortgage insurers want to insure that your house is going to be worth at least what you paid for it. Plus that improvement dollar amount. They don’t want to, they make you’re not going to be over leveraged. And they also want to make sure the house is worth it. So sometimes we get requests for purchase plus improvements for people to put in a pool. That doesn’t always add value to the house, and in some cases, it actually will reduce the value of the home. So if you’re looking at doing these renovations, you really need to be cognizant of is this going to add dollar for dollar value to your home. Most renovations do, Todd. You know, most renovations add lots of value and sometimes it’s quite a lot more than dollar for dollar improvements. You know, if you do a $40,000 renovation, maybe your house is worth $80,000 more.

Clinton Wilkins: [00:27:14.82] I don’t know, but everybody’s situation is a little bit different, but we’re seeing a lot of requests for, you know, kitchen renovations, bathroom renovations, flooring, and sometimes it’s as simple as a coat of paint. And that can make a huge, huge difference to the value of your home and that aesthetic. And, you know, it can really help you personalize your home and improve it. And, you know, I think that it opens up a little bit more options for consumers. You know, it’s all great to buy a home that’s turn and key, or new construction, but there’s only so many options on the market. So I think that if you can know that you can finance some of these renovations and you don’t need to pay for it in cash, you can finance it with the mortgage. The rates are at all time lows. And it really makes sense to combine the renovations with the, you know, the purchase of the home because it’s all going to be in that single mortgage. You know, some consumers will renovate the home after they own it, but they still have no cash. So they have to borrow it on a loan or a line of credit. And, you know, some of these debts are really hard to pay down if you’re close to what your affordability is. And an option for a refinance may take a few years for you to pay down your debt and that you know the value of the home to increase.

“What’s behind that plaster? You never know.”

Todd Veinotte: [00:28:30.84] All right. We’ve got a lot of old housing stock here in HRM and throughout the province, for that matter. And we all know that renovations, what’s behind that plaster? You never know. You just don’t know.

Clinton Wilkins: [00:28:44.43] And, you know, that’s really the risk that you’re taking. And sometimes things do go wrong. And, you know, it’s not just purchases that people want to renovate when they buy a home. Oftentimes, and I would say even more now than ever, people are looking at renovating their existing home because of the limited inventory. So we’re seeing a lot of people calling us to do like refinance. And it could be a mid-term refinance. It could be a refinance at the renewal to pull out that equity based on the as-is value of their home, up to 80 per cent. They’re looking to pull that equity out, to do these renovations, to improve the home they’re in versus selling the existing home and maybe buying a new home, because if you’re selling high today, you’re probably buying high.

Todd Veinotte: [00:29:29.53] Okay, so what I was getting at is that you can have the allocated $100,000 for that big reno that you were expecting to do and that’s all you’ve got. Yet, the contractor gets in there, starts pulling down plaster. You need a new this. You need to do that. That $100,000 turned into $150,000, $175,000. Whatever it is, they already got the walls torn apart. What the heck do you do then?

Clinton Wilkins: [00:29:51.54] Well, you have no choice but to continue really at that point.

Todd Veinotte: [00:29:54.87] You’ve got no money! Or if you’ve got the lender, can you renegotiate with the lender?

Clinton Wilkins: [00:29:58.86] Usually once the renovations start there’s no renegotiating.

Todd Veinotte: [00:30:03.40] Wow. Okay. That’s risky.

Clinton Wilkins: [00:30:05.25] There’s a certain layer of risk, but there’s a certain level of reverse when you buy a home, do you know what I mean? So it’s, what is the educated risk. There’s always going to be worst case scenarios. That’s what life’s all about. But I think if you can work through some of this due diligence and know what you’re getting into, there’s always going to be the variables. But, you know, I would say 90 per cent of the time renovations usually work out, but there’s always going to be overruns. And I think that you need to have the cash and you need to have the credit to cover these overruns. Otherwise you’re jeopardizing your financial position. And if you don’t have the cash or the credit, maybe you shouldn’t do the renovations.

Todd Veinotte: [00:30:42.12] And maybe the bank would then be a red flag, right? That’s part of the lender’s underwriting.

Clinton Wilkins: [00:30:47.04] I would say, you know, when we’re doing things like purchase plus improvements, the lenders are looking to say, okay, do these guys have some available credit to get to completion? Because if they have no cash and if they have no available credit, maybe purchase plus improvements is not a good solution for you. You know, it’s too risky. Maybe you should just buy that home as is, live in it, build up some equity and then maybe put some money away in terms of savings and potentially look at or refinance down the road.

Todd Veinotte: [00:31:15.96] All right. So you talk to about 80 per cent equity. What would give us the nuts and bolts for that 80 per cent? Why it’s important to what we’re discussing here.

Home appraisals

Clinton Wilkins: [00:31:24.03] So for a refinance, let’s say you’re that you’re an existing homeowner and you’re looking to do a renovation. I think a refinance is a great solution. You can refinance up to 80 per cent of the market value of the home, less the existing secured mortgage and or line the credit. So as the values increase, you can get more money out and as you pay down your debt, your equity position is increasing, so some people want to do the renovations on their own and then refinance, that can be a good solution as well if you have the cash or the available credit, because if the work is already done, chances are, if we need to get this property appraised, it’s going to appraise at a higher value. And that means that we could, you know, do a higher mortgage amount.

Todd Veinotte: [00:32:09.74] So that appraisal would be done by an expert hired by the lender, correct?

Clinton Wilkins: [00:32:13.38] Exactly. So we facilitate ordering these appraisals and appraisers are licensed and governed by their governing body and they look at the sales of comparable homes and that’s how the valuations happen. No, not everyone’s going to be happy with their appraisal. You know, oftentimes people think their house is worth more than what it actually is. You know, we all think our stuff is worth more. Right? But the one great thing about what’s happening right now is the values are increasing like gangbusters. You know, I heard some stats that the values went up over 10 per cent last year. And with that increase that enables us to lend people more money when they’re looking to refinance.

Todd Veinotte: [00:32:59.30] And again, that will be based on the work that will be done. Right. So the appraiser looks at it projects out when this garage is finished or whatever, they have to envision that in their mind.

Clinton Wilkins: [00:33:11.72] So typically when we do a refinance for renovations, we’re looking at the as-is value

Todd Veinotte: [00:33:17.06] Oh the as-is value, I see.

Clinton Wilkins: [00:33:18.92] If we do a refinance after the work is done again, it would be the as-is value, but that as-is value is going to be higher. Right? The only time that we really look at, you know, as complete is when we look at purchase plus improvements. That’s when we look at what the as complete value is.

Todd Veinotte: [00:33:36.11] What it will be then, right?

Clinton Wilkins: [00:33:38.15] That’s only if you’re going to buy a home, then we want to make sure that the purchase price plus the improvement amount equals that as improved value.

Todd Veinotte: [00:33:46.22] So the appraiser, will they get a set of plans sometimes to look at?

Clinton Wilkins: [00:33:49.28] Sometimes they’ll get plans, they’ll get the quotes up front so they can really understand what the scope of the work is. And when we talk about things like scope, it’s really important not to deviate from that scope, because when you go to want to get these funds released, we want to make sure that the that the work that was on the quote has been completed, specifically when we’re talking about purchase plus improvements. When we do a refinance, we just give you the funds and then you can do with them what you want. So maybe it is the renovations, but maybe it’s about debt payout, maybe it is about investments. And we can talk about that a little bit more.

Todd Veinotte: [00:34:22.40] Okay, and the spring market and enlisting as well. We’re going to get to that as well.

Clinton Wilkins: [00:34:27.05] Let’s bring in homeownership.

Can Todd borrow Clinton’s Range Rover?

Todd Veinotte: [00:34:28.13] Okay, we’ll be back with a Mortgage 101, Your Guide to Homeownership. We’ll be right back on New 95.7.

Todd Veinotte: [00:34:39.03] One of the less, more, I should say, unknown areas of REO Speedwagon. It’s a hit, but you don’t think of the song when you think of REO Speedwagon. But I love this song.

Clinton Wilkins: [00:34:47.59] You know why I find this is a really motivating song.

Todd Veinotte: [00:34:50.35] It is.

Clinton Wilkins: [00:34:50.89] You know, like, if I’m at the gym or something. You know, I really love that classic rock. And you know this one just drives. It just drives. It’s like, you know, like if you’re getting in the car and you need to go somewhere like, okay, I’m not really messing around. This is a great song,

Todd Veinotte: [00:35:06.17] Especially if you drive a Range Rover like you do.

Clinton Wilkins: [00:35:08.02] Well, I mean, I don’t know if it matters what type of vehicle you have.

Todd Veinotte: [00:35:11.20] Can I borrow that? Can I borrow the Range Rover, by the way? I want to impress my girlfriend.

Clinton Wilkins: [00:35:15.73] For the weekend?

Todd Veinotte: [00:35:16.09] I mean, I already do impress her. I hope. Maybe I don’t.

Clinton Wilkins: [00:35:18.73] Well, I hope that you do. And hopefully she’s tuning in.

Todd Veinotte: [00:35:21.73] She is tuning in. We listen.

Clinton Wilkins: [00:35:22.99] Ok, that’s cool.

[00:35:24.34] But can I borrow the Range Rover?

Clinton Wilkins: [00:35:25.48] I mean, sure. If you guys want to. You know, as long as I have a way to get around.

Todd Veinotte: [00:35:29.86] I’ll let you drive my Mitsubishi RVR. You drive style in that.

Clinton Wilkins: [00:35:33.43] You know what? I actually walk a lot. And, you know, it’s one of those small pleasures in life, is, you know, having, you know, your dream vehicle.

Todd Veinotte: [00:35:45.55] What’s Jonathan Drive? The producer.

Clinton Wilkins: [00:35:47.32] Jonathan is a walker.

Todd Veinotte: [00:35:48.67] Does he drive a vehicle?

Clinton Wilkins: [00:35:50.38] He does not currently drive a vehicle. He’s had some German,

Todd Veinotte: [00:35:53.17] Cheap, eh? I’m sensing he’s cheap.

Clinton Wilkins: [00:35:56.38] I don’t think he’s cheap. I think he’s very generous with his, time and, you know, abilities. Is that a positive, is that a positive spin? I don’t think so.

Todd Veinotte: [00:36:09.37] Okay, a mortgage 101 Your Guide to Homeownership with Clinton Wilkins. We digress. And myself, Todd Veinotte, and it is Spring into Homeownership Edition because it’s March.

Clinton Wilkins: [00:36:20.68] Spring is literally right around the corner. We are like two weeks away.

Listing your home on the market

Todd Veinotte: [00:36:23.53] It is. So let’s talk listings. We know inventories limited right now. How do people know this might be a good time to list their house?

Clinton Wilkins: [00:36:31.48] You know what? If you’re thinking about selling, there is no better time than now. You know, some people are thinking about selling and maybe, you know, building a new home, buying a new home, getting it out of the homeownership business or whatever. But, you know, I think if you’re thinking about listing, now is really the best time. And typically more homes are listed in the spring than any other time of the year. So if you’re in the market and you’re looking to purchase, I think spring is a great time and you’re going to see a flood of listings start coming to the market. And I really want to encourage the listeners, you know, if you’re thinking about selling your home, you know, now is really a great time to think about that. And I think that you’re going to get a little bit more now than you would have before. Again, we don’t know what the future is going to bring. I think that the prices are still going to stay where they’re at. We have a limited amount of inventory here and we certainly do have a lot of population growth. I know we kind of joked about Timmins, Ontario, and people moving.

Todd Veinotte: [00:37:31.78] No, we totally joked about it.

Clinton Wilkins: [00:37:33.13] But it’s reality. People are moving here from all over Ontario. People are moving from Vancouver. In Halifax and across Atlantic Canada, we have a great quality of life and the cost of buying a home, a single family home here is much less than many other areas across Canada.

Buying and selling in a hot market

Todd Veinotte: [00:37:52.47] Okay, to be devil’s advocate guy, because it’s what I’ve done my entire career, I’m going to do now, some would say, oaky, it’s a great time to list because there’s tons of buyers out there. But then you’re stuck with trying to find a home in the same market that you’re saying is hot and the reason to list. So?

Clinton Wilkins: [00:38:08.88] This is true, but, you know, I think here’s the thing: for first time homebuyers to get into this market, there needs to be inventory that they can afford. Right? And if you’re not selling, maybe you’re more starter home and buying up in the market. How are the younger people going to get into the market? And I also, I see and I get calls from people to be like, okay, my parents neighbor is a senior and they’re thinking about going into an apartment. You know, I’m seeing some private sales happening as well. But, you know, you don’t always have that that network. But I think that, you know, people that are looking at maybe retiring, looking at going into apartments or whatever, now is a great time. And I think we probably have some of those listeners listening right now. And if you’re willing to get your house listed, you are going to, you know, really enable maybe a first time homebuyer to get into the market. And as we know, buying a home is the biggest purchase of your life. And obviously the mortgage is the biggest debt and that’s what we’re really talking about. But for first time homebuyers to get into the market, they need a little bit of a helping hand. And, you know, we need to have that inventory available for them. Oftentimes, you know, a family’s home is their biggest asset, you know, and to start building that net worth within that family unit, it really all centers around the home. So I think getting the listings going super important. And there is certainly lots of buyers out there and you’re going to get that top dollar.

Private sales

Todd Veinotte: [00:39:41.10] Okay, so some people like to go the route of selling, private sale, you mentioned that earlier. You can save 10 grand in some, who knows, depending, right? Save a lot of money.

Clinton Wilkins: [00:39:49.53] The normal commission is usually about five or six per cent plus HST

Todd Veinotte: [00:39:52.44] Which is big money on a on a $500,000 sale.

Clinton Wilkins: [00:39:55.53] The one thing I will caution. Sellers normally get more for their home using a realtor. They normally sell it faster and you have more protection.

Todd Veinotte: [00:40:06.52] Where do you get this? This is not anecdotal? This is empirical evidence?

Clinton Wilkins: [00:40:10.90] Is real live data. So, you know, if you’re doing a private sale and it’s someone, you know, cool. If you’re looking to sell your home, I really encourage you to list it with a realtor. I think with a realtor, you can have a better experience and you’re not going to have strangers walking through your home and then you have to deal with this and transact and whatever. And it also gives you a layer of protection that, you know, that that realtor that’s selling your home is looking out for your best interest and the buyer’s realtor is looking out for their buyer’s best interest. So they’re able to broker this deal for you.

Todd Veinotte: [00:40:43.96] Let me ask you this. Have you had people come in and they say they’re purchasing a home or they want to list their home, or whatever it is, and they’re doing a private sale and you’re just looking at it and you’re thinking, I know that you don’t have this done, you don’t have that done. And do you say, look, you might want to look at a realtor.

Clinton Wilkins: [00:41:02.49] Private sales are an actual mess. Every time I see a private sale, I actually cringe. And you know what? Private sales are definitely a red flag for lenders. And there’s a lot more due diligence done on a private sale because there’s no listing cut. There is no brokerage advice from the seller or the buyer’s side. And oftentimes the lenders will call the lawyer on both sides. You can’t use the same lawyer typically on the on the buyer’s and seller’s side. And oftentimes there’s more due diligence done with the with the buyer, with our borrower, really. And that’s because private sales sometimes are a hotbed for fraud. Not that we have a lot of fraud here in Atlanta Canada, but it does happen and we definitely have fraud for shelter and we have fraud for profit. And lenders are doing more due diligence on private sales. And, you know, we have to disclose how the buyer knows the seller when it’s a private sale. They want to know this information up front. And if it’s a family member, you know, that is a different story. But if you’re buying a private sale from a stranger, there is definitely a lot more due diligence. And I would say, you know, these are not files that get auto approved. Right. There is definitely a lot more underwriting. And often there is a full appraisal that may be required by either the lender or the mortgage insurer. And they’re doing a lot more due diligence on private sales for sure.

“Pre-approvals are key”

Todd Veinotte: [00:42:34.47] Okay, and just quickly, if you are house house-hunting, get a pre-approval, right?

Clinton Wilkins: [00:42:38.34] Pre-approvals are key. And really the pre-approval means that you know what you can afford. We know what your income is, your assets and your credit. And, you know, we’re the broker. So we’re able to package that file to get you the best possible solution. And I tell people all the time and we make plans. Sometimes there’s things that you need to do to get pre-approved. And that’s cool. You know, we’re here to hold the hands of borrowers and, you know, we’re really here to be the gatekeeper. And, you know, we want to have all that information because we want to make sure it’s going to be a smooth experience for you. When you buy your home, you want to buy your home with confidence. And we want to know that we’re going to be able to secure you an approval when you make an offer on a home, there’s nothing worse than, you know, making an offer and it falling apart because you can’t get financing.

Todd Veinotte: [00:43:29.32] Okay, how do people get a hold you?

Clinton Wilkins: [00:43:30.84] I think the first place for them to, you know, to start is really check us out online, check us out at TeamClinton.ca/radio. Lots of great information there. We have over 400 blog posts on our website, up to date rates, lots of great information about buying, refinancing, renewing your mortgage. And, you know, certainly reach out to us, or reach out to another unbiased more professional in your area. We’d love to help.

Todd Veinotte: [00:43:58.23] And if people want to check out our Facebook live stream: every Tuesday if they want more of this good content.

Clinton Wilkins: [00:44:02.46] Yeah, every Tuesday at 12:30 p.m., we’re on Facebook and you can get to our Facebook page directly from our website. So again, it’s at TeamClinton.ca/Radio and you can surf right on to our Facebook page and like and follow and you can interact with Todd and I right online.

Todd Veinotte: [00:44:16.35] And we’re back on News 95.7. We do this every month, right?

Clinton Wilkins: [00:44:19.23] Yeah. We’ll be back in April. We’ll talk a little bit more about spring and you know, the news topics of the day.

Todd Veinotte: [00:44:24.90] Thanks, Clinton. It’s been a great chat, as always.

Clinton Wilkins: [00:44:27.39] Thanks, Todd.

Todd Veinotte: [00:44:28.16] Okay, we will be back, as Clinton mentioned, in April and each and every month here on News 95.7, it’s Mortgage 101, Your Guide to Homeownership with Clinton Wilkins and myself, Todd Veinotte. See you next time.

Clinton Wilkins: [00:44:38.82] Have a great weekend.

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.