Mortgage 101: What consumers are doing right now with their mortgages | September 2022 Part 4

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 what consumers are doing right now with their mortgages to combat changing interest rates and a looming recession. Find out when the best time to do a transaction is, what to do if you are at renewal time and why “homeownership is a together thing.”

Mortgage 101 with Clinton Wilkins & Todd Veinotte: What consumers are doing right now with their mortgages

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

Transcript:

The right time to do a transaction is it right for you

Todd Veinotte: [00:00:00:02] We are going to wrap up the show and we’ve had a pretty spirited show. And you want to kind of get more back to some meat and potatoes kind of mortgage.

Clinton Wilkins: [00:00:08:02] Yeah, I feel like…

Todd Veinotte: [00:00:08:21] Educational talk here.

Clinton Wilkins: [00:00:09:24] We just talked, you know, 45 minutes about the news. You know, we could be talking about the news all the time. There’s so much on the go, right?

Todd Veinotte: [00:00:16:25] It’s Topical.

Clinton Wilkins: [00:00:17:17] So topical, at least right now. You know, the one thing that I think our borrowers really want to know and maybe our listeners: Is fall a good time to do a mortgage transaction? Is it a good time to obviously buy a home? We talked about that a little bit. Is it a good time to do a refinance right now, Todd, or an early renewal? And, you know, the answer, I think is the right transaction, the right time to do a transaction is the right time for you.

Obviously, we talked a little bit about rates. That might be prohibitive for some people. I think people that have and consumers that have a mortgage right now, if you’re in a really low fixed rate, maybe it’s good to ride it out until a renewal. But there’s a lot of reasons, Todd, why people do a midterm transaction.

One thing that we should touch on, and I think we’d be remiss not to say, you know, we talked a lot about what’s going on with the variable rate and what’s happening with inflation. A lot of people are doing midterm refinances right now to extend their amortization to 25 and 30 years, Todd. The reason that they’re doing it is really to bring down their borrowing cost and maybe the mortgage isn’t the biggest issue here.

Clinton Wilkins: [00:01:28:27] We talked about other things like inflation, and people are doing that proactively to put more household dollars every month in their account. You know, people need a little bit more buffer.

What consumers are doing right now with their mortgages: Changing amortization

I actually met with one of my existing clients the other day and, you know, they only bought this home a couple of years ago. They have 20 or 21 years left on their amortization and this borrower wanted to do a refinance and extend their amortization to 30 years. The reason being is, you know, they were finding it tough. They make good money, have a government job, but they were finding it tight. And you know what? I sympathise with those borrowers. We looked at the numbers and it was going to save about $200 a month.

Is that a make or breaker for some people, Todd? It is. And $200 that we can put maybe put back in someone’s pocket obviously makes a difference. The ones that really get me excited is when we do a mid-term refinance or a refinance at renewal and people have a bunch of consumer debt, but they have a bunch of equity in their home. That’s what gets me excited, because oftentimes we can put $1,000, $2,000 sometimes back into a household’s monthly budget, and it can really make a huge, huge difference to people.

So I think that’s something to think about. There’s a lot of consumers that are coming up for renewal, regardless of what happens with the rates, and that’s what’s kind of interesting about mortgage lending:

Clinton Wilkins: [00:02:57:17] There’s always a transaction to happen. You know, it really doesn’t matter what’s happening with rates. People come up for renewal, they need to do a refinance. They’re buying a home. These things happen regardless of the rates. Rates don’t really impact us doing transactions that much.

And people that are coming up for renewal, we’re doing a lot of very interesting transactions and some of them are a refinance. You know, that’s just reality.

What consumers are doing right now with their mortgages: Amortized charge

We’re doing a lot of transfers into other lenders and maybe using some of our relationships to get customers a better rate. Specifically, we have a lot of clients that are in home equity lines of credit. Maybe their entire debt is a home equity line, or maybe it’s a mortgage on a home equity line. We are doing a lot of transfers out from their existing lender into an amortized charge with another lender.

Typically the costs are being covered by the new lender and we’re putting all the debt into an amortized charge, sometimes at 30 years, sometimes at 25 years, sometimes shorter, just depending on what their situation is. And typically, we’re getting some really good rates for those type of customers.

Your home equity lines were very popular in the 90s, 2000s. I think they’re a little bit less popular now and maybe in the future they’re going to be less popular, especially what’s going on right now with the Bank of Canada. Canadians have a staggering amount of household debt, Todd.

Clinton Wilkins: [00:04:22:24] And I think going into an amortized charge will force Canadians to pay down their debt. And when we do some of these calculations, it’s very close between the payment on an amortized charge as it is with an interest-only home equity line. The reason being is the interest rates on the home equity lines are quite a bit higher.

Typically they’re somewhere around prime plus 50 basis points, where we know a variable rate mortgage is prime minus, right? So we’re certainly seeing those type of customers every day.

We’re doing a lot more advice for existing clients, and consumers who haven’t done a transaction with us
And, you know, we’re certainly having more conversations with customers than we ever had. Customers that we’ve done a transaction with, and potential customers that we haven’t transacted with yet. And I think we’re providing more advice now, Todd, than just simply doing transactions. And that’s really where the value comes, I believe, with a mortgage broker.

We’ve done in our office here almost 5,000 transactions for over $1 billion worth of mortgages. We’ve done a lot of deals. We’ve done a lot of mortgages. We’ve seen everything when it comes to assets, credit, income. And we can really provide that expert advice, which I think has a value to the consumer. And we can also ensure consumers are in the best possible product

And what I said at the beginning of the show, doing a transaction, it’s a snapshot in time. It’s a snapshot in time. We’re looking at the history and we’re taking into account what we know about the future.

What to do if you are at renewal time

Todd Veinotte: [00:05:51:11] Something that people need to, I think, understand and probably most do out there, but if you’re going to renew, if you’re staying with the existing lender, then you don’t have to provide income. None of that stuff.

Clinton Wilkins: [00:06:02:07] There’s no qualification. The downside, we kind of touched on it a little bit. If you’re in a fixed rate right now, you and you want to take a fixed rate, your amortization needs to stay the same if you re going to renew with your lender.

You only have the options that your lender is giving you, right? And oftentimes the lenders know that, Todd, and the renewal offers that I see coming out are typically above what’s available in the market when you do a straight renewal with your existing lender. It typically pays to do a transfer out. And oftentimes on a transfer out, there’s no cost to you. It’s free. Which is, I think, worth it to at least have the conversation and look and see where things are.

Todd Veinotte: [00:06:40:08] But some people just don’t want to take the time. They don’t want to get their payroll…

Clinton Wilkins: [00:06:44:28] I talked to a customer today and she’s a friend of mine. We won’t say her name live on the air. She’s not in this market and she’s not in Ottawa. She let her mortgage renew into, like did not renew. It renewed into a close term for six months. And, you know, it was busy. Just had a lot on the go. We’re going to do a transaction now. We’re going to do a transaction and now we know what the new dates are.

We’re gonna get everything set up, have some time. But short terms and open terms right now, I had a client the other day renewed into an open 9%. So, you know, I think taking those prudent steps, looking at what your options are certainly has a value.

“Homeownership is a together thing.”

Todd Veinotte: [00:07:28:04] Absolutely, and it ties back into what you’ve always talked about: Open your mail. It’s part of it, right.

Clinton Wilkins: [00:07:32:19] Open your mail. Have your wine Wednesday or mortgage Monday or finance Friday, I don’t know, and open your mail. If you’re a single person open it, look, know what’s going on. If you’re in a relationship, do it together. Open communication certainly will provide, I think, a better financial future.

Todd Veinotte: [00:07:51:17] So the theme to the show is: Do it together.

Clinton Wilkins: [00:07:53:23] Do it together. Come on, do it together, people. Homeownership is a together thing, right?

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.

Podcast: