Mortgage 101 – Restarting At Renewal | June 5th, 2023

On the latest edition of Mortgage 101 – Clinton Wilkins and Todd Veinotte are discussing home equity lines of credits and refinancing. The guys discuss the importance of shopping around at renewal, the value of amortizing a HELOC and why refinances are more common.

Todd Veinotte 00:00
If you were to play an instrument, which would it be?

Clinton Wilkins 00:03
I don’t know, when I you know, these days, I don’t think I’d probably do drums or something because I think it would get out some of my aggression.

Todd Veinotte 00:10
No, that’s not good. You’re a front guy, you gotta be out front.

Clinton Wilkins 00:15
Here’s the challenge, sometimes, you know what, I think I would want to be like the singer because I like being out front. But, you know, I’m not always great with the words. You know what I mean? So I really have to like, know it.

Todd Veinotte 00:27
Okay, well, let’s suggest that you were you’re a virtuoso at whatever instrument your position you wanted to be. Okay. You would be a front guy.

Clinton Wilkins 00:35
Yeah, maybe it could be like the keyboard one. I don’t know.

Todd Veinotte 00:37
No, front keyboards are not front guy. They are generally losers of the band.

Clinton Wilkins 00:42
Okay. To all you keyboardist out there, don’t listen to what Todd Veinotte has to say. But you can send him a tweet. What’s the hierarchy of our show? What do you think?

Todd Veinotte 00:48
Here’s the hierarchy of a band, okay? It’s the singer, guitar player, a bass player because sometimes people don’t understand bass between guitar so by default right? Then it’s drummer then just keyboard player right at the end. That’s how it works.

Clinton Wilkins 01:01
It’s definitely you. No, come on, come on. It’s Todd Veinotte and Clinton Wilkins is not Clinton Wilkins and Todd Veinotte.

Todd Veinotte 01:14
That’s how I say it.

Clinton Wilkins 01:15
Okay. I don’t know. But I will give a shout out to our producer Sarah, she’s been with us all year. Yeah, it’s true. She put up with us now for I guess, five months, which is really, you know, that’s a big commitment.

Todd Veinotte 01:26
That’s a big commitment.

Clinton Wilkins 01:27
And while we have you here, and while you’re listening to us kind of banter and you know, celebrate the ECMAs. If you want to catch our show, you know, you can listen to it on the Rogers website. So I guess it would be City News website. You could also check us out anywhere where you listen to your podcasts. So Spotify, Apple Music.

Todd Veinotte 01:48
Stitcher? Is there Stitcher? Does that exist?

Clinton Wilkins 01:52
I don’t know, you might know more than I do. But anyway, we’re also on social media. So check us out. If there’s ever anything you want us to talk about, on our show, we’d love to get it in. And we’d love to talk about it. We’d love to talk about it. Yeah, we’d love to talk mortgages. And we love to talk mortgages, and we’re gonna talk about that.

Shop around when you are up for renewal

Todd Veinotte 02:08
Absolutely. So let’s talk about what, renewals?

Clinton Wilkins 02:10
Yeah, we’re gonna talk about renewals.

Todd Veinotte 02:12
And we’ve kind of touched on this already.

Clinton Wilkins 02:13
Yeah we touched on it a little bit, and we’re gonna talk about refinance, it’s just so so important. And I feel like we need to dive into this a little bit more. You know, if you own a home already, typically, you have some equity in that home, especially if you bought it like 2019 prior. So if you have a mortgage that’s coming up for renewal, I think it’s very prudent right now to shop around or at least ask the questions, okay? Not all lenders are equal in terms of the pricing, there is a wide difference. And, you know, in terms of shopping around, it might be a transfer from lender to lender. And typically, that comes without a cost, okay, typically, the new lender will cover the cost of trying to do a transfer. But if you want to do a refinance, that might come with some low cost, you know, maybe an appraisal or, you know, registration costs. But in a refinance situation, you might be able to pull out equity in terms of doing renovations. And that’s really great during the spring in the summer, or clean up some consumer debt. And some clients are choosing to extend their amortizations because let’s focus the rates are higher than they were the last couple of years. And maybe taking a longer amortization for the interim, for a shorter period of time, makes sense. We’re seeing more and more clients wanting to take home equity lines of credit. You know, I used to say, you know what, these are things of the 90s. The 2000s. Like HELOC, they’re dead.

The value of a home equity line of credit (HELOC)

Todd Veinotte 02:38
Why do they call a HELOC?

Clinton Wilkins 03:26
A home equity line of credit. You know, we love our acronyms in this business. Wasn’t Manulife, didn’t they have, like –

Clinton Wilkins 03:35
Yeah, the Manulife One is a very popular format, and we do offer that product, you would have, you know, a fixed component, and the variable component, the variable would be the revolving. And you can you can have that up to 80% of your property. The revolving component can be a maximum of 65%. So you’d have to have at least 15% in a term position. And, you know, what we’re doing with consumers, though, you know, if they want that type of product, typically, we’re moving over the debt that they want kind of right now. So that might be their existing mortgage, or if they’re gonna pull in any consumer debt, we’ll have that until we’re like one product. And then we’ll give them a home equity line for the balance of the equity up to 80% of their market value. And that’s there, maybe for a future project, but it doesn’t cost you anything to have that home equity line, right? You’re not paying interest unless you draw it down. And the nice thing is with this line of credit, it’s lower than any of your consumer debt. You know what I mean? Typically, these lines are at prime plus 50, or lower, sometimes we’re seeing them as low as that prime or prime plus 20. Those are usually you know, better, better pricing, so.

Amortizing a home equity line of credit

Todd Veinotte 04:41
Okay, so you were mentioning that with rates higher, obviously, when with people renewing, especially if they’ve had a really low rate, in order to help absorb some of that, that shock, they can amortize it –

Clinton Wilkins 04:54
Over a longer period of time. So speaking of products like Manulife One, there’s other bank lenders that offer a similar type of product that’s a mortgage on a line of credit. Sometimes these home equity lines are a forever plan, Todd. They’re not really meant to be a forever plan, but they end up becoming a forever plan. So what you can do is you could collapse that whole plan into an amortized mortgage, let’s say at 25 years, and get an insurable rate. So typically, the rate that we could get to combine the two is lower than what it would be for each each segment individually, right? So we’re doing more of that type of thing, combining the two. And that’s not even a refinance, we can do that as a transfer or as a renewal, we can combine the two, as long as it’s all secured against the property combining that is not a worry. And we’re certainly seeing those types of transactions. You know, I think if you have a home equity line that’s at the max, and you’re at prime plus, why not amortize it? Yeah, you know what I mean? Get a lower rate, amortize it over 25 years, and it forces you to pay it down.

Todd Veinotte 05:55
Yeah, absolutely. Yeah. But I mean, again, these are all things that you need to have conversation with your mortgage specialist about.

Clinton Wilkins 06:01
And you need to look at your finances, you know, every so often. You know, I think when it’s a new season, or if it’s Financial Literacy Month, or if it’s the first of the year, first of the week, it’s first of the month, look at your finances, see where things sit.

Refinancing is becoming more common

Todd Veinotte 06:14
Yeah, what about re-mortgage?

Clinton Wilkins 06:16
Like a refinance?

Todd Veinotte 06:17
Yeah, refinance. When’s the ideal time to refinance?

Clinton Wilkins 06:18
So you can refinance up to 80% of the market value of your home. And we’re certainly seeing more refinances this year than we have in the past. Why do you think that is? Why do you think that is? You know, I think there are some cracks starting to happen. I think some people are starting to have a bit of a hard time, we need to remember like, during COVID, people weren’t shopping, they weren’t eating out, they weren’t traveling, but they’re starting to do those things again. So sometimes people are getting themselves into trouble. But a refinance is not just to clean up consumer debt. We’re seeing refinances for people, you know, to do improvements to the property, you know, are you going to refinance, if you have a very low fixed rate midterm? Probably not. But you might do the refinance at renewal. We’re seeing people doing refinances out of a variable rate. People are doing refinances, you know, at the end of the term, but we are seeing people that will refinance and during the middle term, even in a low rate, because sometimes they need to refinance. I think at renewal, it’s always the right time, because you’re a free agent at renewal, you can shop around you can get advice, we can make changes, and it comes without a cost. So some lenders will allow us to look at doing it four months in advance of the renewal date. We can always get an approval for months prior, some lenders will actually let us pay it out four months prior. So we’re talking to them, maybe even eight months before the renewal. With our customers, we start getting in touch way, way before the renewal because it’s so important. And you know, I think getting something approved today, even if it’s not going to close until August or September, at least you know what you have, because if the rates do go up, at least you have something held, which I think is important.

Todd Veinotte 07:53
It’s something that people should make sure that they have an order, of course or other documentation. Tax season just passed, if you need to have your tax docs, all that.

Clinton Wilkins 08:00
It would shock you. So many people have not filed their income tax. Just because, you know, some of the CRA workers or all CRA workers were on strike for you know, eight or ten days or whatever. They’re back, and the deadline didn’t change, you need to get your taxes filed. And you know, that’s one thing that you really can’t mess around with is taxes. What’s the old adage? What are two things that you can’t avoid?

Todd Veinotte 08:23
Death and taxes, man death and taxes.

Clinton Wilkins 08:24
You heard it here from Todd.

Todd Veinotte 08:26
How do people get ahold of you?

Clinton Wilkins 08:27
You know, check us out online at team clinton.ca/radio. We have like over 500 blog posts on there, we have some rates, you know examples of rates. There’s links to our show, our social media, lots of great content check us out. And you know, thanks everybody for tuning in.

Todd Veinotte 08:44
Absolutely. Thanks so much for tuning in. Always great Clinton. Hopefully you had as much fun as I had.

Clinton Wilkins 08:48
I always have fun. I look forward to Mortgage 101, it’s one of the best things that I do. I talk to people all the time and the listeners and you know, I thank you.

Todd Veinotte 08:55
Excellent Mortgage 101 your guide to homeownership with Clinton Wilkins and myself, Todd Veinotte. Thanks so much for tuning in and listening.