Mortgage 101 – When Life Happens

Clinton Wilkins and Dan Ahlstrand discuss the ins and outs of mortgage brokering, focusing on refinancing and managing mortgage rates.

Dan Ahlstrand
And welcome back to Mortgage 101. He’s Clinton Wilkins. I’m Dan Ahlstrand. We’ve been kind of giving you the inside how it all works when it comes to getting a mortgage through a broker like Clinton during this episode. Clinton, we’ve come through the process. We’ve come through the pre-approval. We’ve got our mortgage. Things are done. All the tees are crossed. The i’s are dotted. Then what happens? Life changes suddenly. I’m out of a job. Kind of know what that feels like.

Clinton Wilkins
Life happens. It’s divorce, health issues, change of career, no career.

Dan Ahlstrand
It happens. So if my life changes and I need to maybe take a look at my mortgage or refinance, how do I do that?

Clinton Wilkins
Well, I think the key is you really need to make your payments, and I think that’s huge. I see so many customers that even on unsecured debt payments, they’ll miss a payment for like $10. It’s like, why are you missing that? Put it on automatic now. All these lenders now offer all these like automatic payments, and I just don’t understand why sometimes people like let something go. They’re like, “Oh, I forgot.” Well, make it automatic, and you won’t forget. So that’s one. But call us before there’s a problem. If you’re struggling, let us know. I see so many customers that are struggling, maybe with debt, maybe they have a change in their income, maybe they’ve had a matrimonial breakdown, health issues, and they have tons and tons of equity in their home, which we could help them with, but they basically-I’ll call it-they ostrich. They bury their head in the sand, and they don’t ask for help. I think people are so proud, but typically people in Atlantic Canada are making their mortgage payments, but mortgage arrears across the country are at basically all-time highs because things are tight, and it’s not just the mortgage rates. It’s the indebtedness. It’s inflation. It’s the cost of operating a home. It really has gone up. People’s income has not gone up, though. So, if you own a home that has a lot of equity, that’s great. We’d love to refinance. You can always refinance up to 80% of the market value. So I’m just going to give our listeners a little bit of quick math- off-the-napkin type math. Let’s assume the home is worth $500,000. That’s below what the average is in Halifax, but we’ll just use 500 because I know what those numbers look like in my mind. So let’s say the property value is 500. We can do a new mortgage up to 400,000. Now, Dan, what needs to be paid out of the 400? Anything that’s secured against the home- so mortgage, home equity line, combo type products- all of that needs to be paid to that 400,000, and then the difference is basically the new equity that you can access. So that new money, you may pay unsecured debts, maybe you’re going to use that for investments, maybe you’re going to use that to improve the property, or maybe you’re going to use that to buy another property, maybe a second home or a rental property or something like that. So 80% of the market value, and how is the market value determined? There are automatic property valuation systems, so oftentimes we’ll try that first to see if that’ll work. And I think right now, at least in Halifax, the assessments are very close to where the market value is. Now we have listeners in PEI and New Brunswick and really probably across the country, people are tuning in and listening to the show. But here in Halifax, where we’re doing the show right now, the market value is very close to what the assessment is. Now that’s not always the case, but we’re just using that as a rule of thumb. If the property value is not supported,, internally, or if that lender doesn’t have an automatic property valuation system, we would get an approval first, and then we would get a full appraisal done on the property, and that appraisal would be done by a licensed appraiser, and they would look at that home and compare it to similar homes that it would have sold in that n that neighborhood, and then they will do the adjustments and figure out what that market value is likely to be. Some customers don’t agree with the appraisal. Some people think that their house is worth a lot more than what it’s worth, and maybe on a real sale you can sell it for more. But we’re using historical data when we’re doing an appraisal. We’re looking at what similar homes are selling for in your neighbourhood, and some properties don’t have good comparables. That’s just reality. Maybe they have to go to a further radius, or maybe they have to use a different style of home because maybe you have a unique property, or maybe you have the best property on the worst street, which nobody ever wants to have. You really always want to have the worst property on the best street, and that’s typically the way to get a better appraisal. And then we can use 80% of that appraisal value, and if appraisals come in lower, we can then we would just adjust the appraisal down to the maximum of 80%. But sometimes the appraisals come in a lot higher, and as much as people don’t think that happens, it really, really does. I had one in Cole Harbour the other day, and it was a new construction or newer construction property, and the client’s like, “Oh, I think it’s worth 800.” Maybe that appraisal came in above $900,000. The clients were shocked. I was shocked. I was happy, and the clients got exactly what they wanted. They actually got more. So we were able to actually, instead of just doing a mortgage with the term component, we were able to do a home equity line of credit.

Dan Ahlstrand
Are these sometimes called second mortgages? Is that kind of deal?

Clinton Wilkins
We did it all under one registration. So lenders like Scotia Bank, TD Bank, they have Combo and Manulife Bank. We use all three of those. They have Combo products where it’s a mortgage and a home equity line, where we’ll have a global limit, but we’ll break it into several components. Sometimes maybe it’s two components, maybe it’s more, depending on which lender it is, and then we can splice up that 80% into whatever kind of chunks they want. Most commonly, it would be a mortgage and a home equity line, and a lot of these products work as you pay down the mortgage. The amount available on the home equity line will increase.

Dan Ahlstrand
I think it was last month you were you were talking about a client that had visited you within the last few months that was in a pretty serious situation with Red Ink and came to you and said, like, look, I’m in a bad state, and you ran the numbers and you you sai,d why don’t you come to me sooner? And they were worried about protecting their rate. Yeah, do you do you find that a lot that people think, okay, I’m locked in that X amount percentage and and I’m never going to get that again?

Clinton Wilkins
No, I can’t remember this one specifically, but I’m pretty sure it was like 199. They’re like, “Well, I need to write out this mortgage rate. Their mortgage rate is so good, but I’m like, “Guys, you have $100,000 of credit card and unsecured line of credit debt at like crazy interest rates. Like, I think it averaged out like 15, 18%. I’m like, “This is nuts. There’s no world where it made sense for you to ride out this rate. In their mind, though, they’re like, “Well, the mortgage is a bulk of our debt. Why would we break this 1.99? Well, I think they broke even in like two months or three months for the amount of interest that they were paying on everything else. And if they had done it a year sooner, they would have been way, way ahead of the game. They were basically in a shortfall each month. Dan, each month that went by, they owed more and more and more and more. So as much as they were making their minimum payments, the cost of borrowing was basically a shortfall from their budget, and they had to borrow even more every month just to keep things going. So, have an open and honest conversation. If you don’t have the equity, I mean, you can only refinance up to 80%. That’s reality. Maybe have to wait a couple years. But a lot of people that we see that we’re doing these refinances for have a lot of equity, and we’re not even refinancing to the full 80%. Like some people were doing to 75% or 70 or 65. Just depends on what their situation is, and that’s why I think everybody’s situation is different, and that’s why you really have to like look at each file independently. We look at the income, the assets, and the credit, and then put together the best solution for their needs.

Dan Ahlstrand
Clinton, you mentioned these home equity loans, and using that money, not necessarily just to pay off debt, but to improve the home. There may be some people that are listening to us this episode. It is August. They may be at the beach, or they may be at a friend’s cottage, and they think, “Hey, this is something that we should get into. You can can you use that equity that’s in your home for things like recreational properties, or second income properties, or something along those lines, or would it be better to get a second mortgage completely done on those properties?

Clinton Wilkins
I would say I think sometimes it’s both, Dan. Maybe you’re going to get the down payment from this refinance, whether it’s from equity from that mortgage or whether it’s from the home equity line of credit. Maybe you’re going to do the down payment and the closing costs from that, but then on the new property, we do a mortgage on that as well, and I think sometimes it’s two-tiered. It really depends on how much equity you have, what the new property is going to cost, and what you can swing. So that’s why I think it’s important. Like everybody’s situation is different, and we look at everything really on an individual basis. This is not a one-size-fits-all business. I would say it’s almost the opposite. It’s like a snowflake. Every file is different, and I think that’s why I like it so much. It’s like every day is a different day, and every file is a different file. So that’s why I think it’s just so important to really go into it with an open mind, but also get that advice.

Dan Ahlstrand
Fantastic information, and I hope folks that we maybe dispelled some of the myths and the rumours and innuendo that’s out there, Clinton. We’re coming up into the fall. I don’t want to say it. I don’t want to change the season. Not yet.

Clinton Wilkins
Not yet.

Dan Ahlstrand
But what are you expecting for the real estate market as we get through August and back to school and into September and into the latter half of 2026?

Clinton Wilkins
I think September and October are going to be very busy when it comes to real estate. I think so. I’m cautiously optimistic. I think we’re too busy until the end of October. Typically, November, December, into January, February, March is typically a slower time for buying and selling real estate. But we’ll see. Maybe we’ll have another realtor honour show her in the back half of. The year or the last quarter of the year, and we’ll get some insights. I’m going to be curious to see how their summer was, and NSAR will put out reports, CMHC will put out reports, and so while MLS, so we’re going to find out really what the results look like. For me, I think that again we’re in the plateau when it comes to rates, and I think it’s probably not the busiest real estate season ever, but I-it’s certainly a lot of transactions are happening, and I think we’re going to see more transactions happening into the fall.

Dan Ahlstrand
Please tell me you’re going to wear that shirt again.

Clinton Wilkins
I will wear the shirt. , I wore this because I mean everybody needs to have a fun shirt, and if you’re only listening to us on a podcast, you’re going to have to look at TikTok, Instagram, on our Facebook, and see what see what see what we’re we’re wearing, but I definitely wore a fun shirt just for you, Dan, and hopefully our viewers at home really liked it. And we really appreciate everybody tuning in. Some people are going to find us that have only heard us on FM, and they’re coming and they’re listening to us on a new mode of delivery. And I think we probably have a lot of new people listening to us.

Dan Ahlstrand
And we’re going to continue the show. We’re going to continue it again next month. And I encourage you to tune in because we may have some surprise announcements.

Clinton Wilkins
I think we have some news, so make sure you tune in next time. Thanks, everybody.

Dan Ahlstrand
Thanks, Clinton. Have a good day, everybody, and we’ll see you when we see you.