Mortgage 101 – real estate wants vs needs | August 2022 Part 2

In this episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7 and CityNews 101.1, the guys talk about real estate wants vs needs. Learn how you can find out what needs are worth considering when you buy a home, how to discover the minimum needs for your household and why you also need to keep your financial documents organized.

Mortgage 101 with Clinton Wilkins & Todd Veinotte: Real estate wants vs needs

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

Transcript:

Wants vs needs

Todd Veinotte: [00:00:00:04] We’re in rough waters right now. I think everybody would agree with that.

Clinton Wilkins: [00:00:02:28] Yeah, I think we’re certainly, it’s a bit of a storm. I think I used, kind of, that analogy.

Todd Veinotte: [00:00:07:19] A storm.

Clinton Wilkins: [00:00:08:06] And, you know, we’re in a storm not just with the cost of borrowing. You know, we talked about the Bank of Canada on our last segment here, we’re in a storm of consumer goods. We’re in a storm of spending. People are trying to find their way again. And, you know, I think it’s so, so important that people, consumers, our customers, Canadians really look in the mirror and look at what’s going out every single day.

Like, I think we really need to look at what our minimum needs are? How much does it cost to operate your household? How much does it cost to service your debt? And, you know, I think we’re in a situation where cash is more king now than it might be before.

Todd Veinotte: [00:00:55:00] How so? What do you mean?

Minimum needs for a household

Clinton Wilkins: [00:00:55:26] I think that, like, we don’t know what’s going to happen with the cost of fuel and, you know, the cost of groceries and the cost of other things. We don’t know when that’s going to level out. We don’t know how long it’s going to take to get inflation under control. And a lot of people have a finite amount of household income.

Todd Veinotte: [00:01:17:04] Most people.

Clinton Wilkins: [00:01:17:26] Unless you’re self-employed, really. It’s hard to make more money unless you’re doing a side hustle or you have a part time job or something like that. And, you know, cost of goods certainly have gone up a lot quicker with inflation than people’s income have.

But if you keep your spending the same, what that means is you may be starting to go into the hole. And consumers in general only have so much available credit. And available credit now has become more expensive, obviously, with the increase in the interest rate. So, I think it’s getting back to basics, Todd. I think that’s really going to be the answer over the next several months.

Todd Veinotte: [00:01:54:20] Yeah. When it comes to one to needs, I think that you need to look at that when you’re purchasing your house as well. What do I want? What do I actually need? And more importantly, what’s sustainable?

First time home buyers buying luxury homes

Clinton Wilkins: [00:02:02:27] I certainly 100% agree. I would say over the last several years, first time home buyers haven’t been buying starter homes. And I think that’s a little bit problematic. We are certainly seeing a lot of first time homebuyers over the last few years, they wanted to buy the new construction single family home with the granite countertops and stainless steel appliances and all these things. And obviously the cost of real estate across this country have increased. With the pandemic, you know, where there’s only so much supply. But the demand has been higher.

I think first time homebuyers, I mean and I’m happy to report, I think are buying some more starter homes, or what we would know as a starter home. And typically buying a home is the biggest purchase of your life and the mortgage is the biggest debt, we talk about this all the time on our show.

But I think getting into this property ladder is so important. Because typically real estate increases in value. And as you have a mortgage and you make your mortgage payments, you pay down the debt. So you’re increasing that net worth every month that goes by. And I think in the past for some homebuyers, you know, if they couldn’t buy their dream home the first time along, they would wait.

But what we’re seeing is real estate has increase in value the last couple of years. Mortgage interest costs have increased over the last couple of years. So to really buy a house right now is more expensive. And it’s not just the purchase price, it’s the cost of borrowing than it was even a couple of years ago.

Clinton Wilkins: [00:03:29:09] So the people who bought a home in 2019, 2018, 2017, they’re reaping these benefits of typically pretty low borrowing costs. And they bought the property obviously below where the market value is right now. And maybe they could afford maybe a slightly nicer home, for the same kind of cost. But that doesn’t mean that all real estate hasn’t increased in value.

Location, location, location

And I think the people that were on the fence and maybe couldn’t afford their dream home a couple of years ago have had to kind of reset their expectations and I think knowing what the minimum you need is, is really important. We did a session here in Halifax during Pride. It was called Pride in Homeownership. We talked about it a little bit on our show last month. And we had a realtor and a lawyer on. And one thing that really came up is, buy kind of the worst house in the in the best neighbourhood.

You can always improve your home. And that might be some of the wants. But you can’t change location and location maybe that need. And I think it takes a little bit of soul searching. Like where do you want to live in your community? There’s pros and cons.

Todd Veinotte: [00:04:38:27] If you have kids, how old you are.

Clinton Wilkins: [00:04:41:11] Your lifestyle changes over time. What’s going to basically. Work for you for the next period of your life? And, you know, I think when consumers buy a home, it’s not forever anymore. Like my parents were in the same house since 1985. That’s not the norm anymore.

Housing is a minimum need

You know, I think consumers are buying and selling kind of more quickly. And I think just getting into the real estate ladder with that minimum need, I think is kind of the way to go.

Todd Veinotte: [00:05:11:15] Yeah, I think there are, you would know this better than anybody, there are products from lenders which allow people to move as well. You import mortgages and from what I understand, you couldn’t do that in the in the 80s could you?

Clinton Wilkins: [00:05:24:00] Yeah, I think maybe people were porting and maybe there were maybe more consumers assuming a mortgage, but the mortgages were a lot smaller, Todd, and now obviously we’re borrowing at maybe even a higher percentage of our annual income for housing. So, there’s a lot of different considerations. And obviously housing is a bare minimum need.

Todd Veinotte: [00:05:47:20] Yeah.

Clinton Wilkins: [00:05:48:20] And there’s a lot of other things that we spend our money on every month that could be wants like clothes and eating out and travel. And I think those are the things that we really need to think about. You know, I see customers all the time and, you know, I tell them if you’re buying a new home, you don’t need to buy a new vehicle, but if you’re in a car accident, you do need one. So a new vehicle that you want is not necessarily the need unless you need transportation, of course. Right? And that’s what I really think you kind of need to go through.

And you need to go through your budget. Like go through your bank statements and go through your credit card statements and look at all your purchases maybe from the last 90 days, and maybe highlight in two different colours, like what was a need and what was a want, and then kind of figure out that budget piece.

And I’m not saying don’t treat yourself. Don’t get me wrong. But I think knowing kind of what you need to service what you have is important. Because maybe some of these needs are going to become more expensive.

Organize your financial documents

Todd Veinotte: [00:06:56:04] Well, people should be going through their bank statements and there could be fraudulent purchases or whatever it might be.

Clinton Wilkins: [00:07:01:09] A lot of people don’t even open their mail, Todd.

Todd Veinotte: [00:07:03:23] Like what percent of people? I still, you tell me that and I still find that hard to believe. Blows my mind.

Clinton Wilkins: [00:07:07:28] Yeah, well, I hear every day people can’t find their documents. We need like kind of basic documents, typically, when we’re doing a mortgage transaction. You know if you already own a home, we need your 2021 annual mortgage statement and we need your most recent property tax bill. I have a lot of people who give me property tax bills from 2021, but.

Clinton Wilkins: [00:07:26:03] Guess what? We’ve already had now a bill for 2022. And I think, you know, having your documents together, I think you need to open your mail, and I think sometimes people don’t want to face the music. You know, if you owe money, sometimes you just don’t, you want to avoid it. Put your head in the sand. But I think having a handle on it and looking at it and talking about it is really very important, especially if you’re in a relationship with someone.

Todd Veinotte: [00:07:53:22] Sure.

Clinton Wilkins: [00:07:53:22] You know, I think being open and honest and, you know, often times these partnerships, not everyone knows what’s going on with the other person. A lot of these finances are really very, very separate and I think working as a team, that is important too.

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.

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