More Money Podcast - 301 What to Know About Getting a Mortgage (and Using a Credit Union) - Michael Borrelli, Branch Manager, Alterna Savings Credit Union

Episode Date: November 4, 2021

BONUS EPISODE! This episode is incredibly apt if you’ve been following along on my house hunting journey because it’s all about mortgages! I’m joined by the Branch Manager of the Bay Street Branch in Toronto for Alterna Savings, Michael Borrelli. Michael has been in the financial services industry for over 19 years with expertise in retail banking, product management, and acquisition. Michael is passionate about financial literacy and giving people transparent advice from a caring place so that they can better their financial wellbeing. In this episode, Michael fields my laundry list of questions all about mortgages and what to know for first-time buyers, how to set a budget to buy a property, and explains what all that mortgage jargon means in real terms. This episode is great for people who are thinking of getting into the real estate market and buying a home for the first time or already seasoned homeowners since I even learned some incredibly useful, new things! For full episode show notes visit https://jessicamoorhouse.com/301 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome back to the More Money Podcast. This is your host, Jessica Morehouse, and this is episode 301, 300 and 1. And this is also a bonus episode. So yes, yesterday, yesterday's podcast, we hit the big 300 milestone of More Money Podcast episodes, which was super exciting. Another big bombshell that I dropped on you though was that I mean, if you've been following me along, especially over the past couple months, well, you know, I've been very busy with house stuff. So we sold our townhouse back at the end of September, and have been just literally living our lives in boxes and the most stressed and anxious I feel like I've been in a long time house hunting in this crazy real estate market in Toronto. But the good news is, as I

mentioned at the end of yesterday's episode, the house hunting has ended finally. And we, me and my husband have bought a house. So we have a place to live come January. Thank goodness because we, you know, we were, I'm not, I'm'm gonna make some more content about this I probably I'm definitely gonna do a solo episode at the end of this season in December to really just share all my thoughts about everything that's been going on because I still don't think I've processed it but honestly we really were about to move anywhere like I was considering Prince Edward County, St. Catharines, Mississauga, Oakville. We were open to anything. But we really, you know, in our hearts really wanted to stay in Toronto because I love this place. You know, I've been here, I mean, eight and a half years now,

and it feels like my home. And so that's what we were always rooting for. But we were okay moving outside the city, but we're also okay renting. We were open, but in the back of our minds, we really wanted to find a house in Toronto and we did. So that's very exciting. And this is such a good timing, quite honestly, really good timing. Because I've been going through all this and just talking about house hunting and mortgages with everybody who will let me talk to them about this stuff. It is front of mine. And well, if you're in the same boat, or you're you're thinking of getting into the housing market, you're a first time homebuyer, or like me, you're a second time homebuyer. And you want to know what you need to know about buying something during this, you know,

interesting time that we're living in. No matter where you're at in Canada, I'm sure the real estate market is bonkers because that's just what it seems like everyone I know across the country has been experiencing. So for this episode, I have the wonderful Michael Borelli. He's the branch manager at the Bay Street branch of Alterna Savings. And oh, we have a really great conversation. i literally had a huge long laundry list of questions to ask him that uh of things that i want to to know to share with you and also i know because i've been talking to so many people these are questions i know you have and you're going to get answers so a little bit about michael so he's a seasoned financial services professional who has

been in the financial services industry for over 19 years and he has significant experience in retail banking product management and acquisition as well as public speaking which is why he was such a great podcast host michael is passionate about financial literacy and helping members with caring transparent advice to better their financial well-being and currently michael is managing the flagship bay street branch in downtown toronto for alterna savings where he leads a team of over 20 colleagues and on a personal level michael is a proud father of two daughters who are active in both competitive soccer and the

royal conservatory piano very fancy um so yeah in this episode we're going to dive into it so if you're if you want to know the details if you are are you know getting into this for the first time and again there's a lot to know. It is the biggest, as we talked about this in the episode, is the biggest financial decision you're going to make in your lifetime getting a mortgage. So, you know, you want to do it right. And you want to make sure you've got all those boxes checked and you're going into it fully informed. So you are going to love this conversation. We also, of course, talk about, you know, mortgages and credit unions,

because I feel like credit unions do not get enough attention when we talk about, I mean, just financial services in general, but also lending. And they are a great option in terms of getting a mortgage. So we talk about it all in this episode. So without further ado, here is that interview with Michael. Welcome, Michael, to the More Money Podcast. I'm so excited to have you on to talk about a topic that is very close to home. I recently sold my place and bought a new place. So this is very front of mind and I'm very excited to talk about mortgages for this episode with you. Welcome to the show. Yeah, thank you very much and congratulations on your new purchase. That's very exciting. Thank you. Exciting and terrifying. That's right. That's right. As every new homeowner,

you're like, oh, wow. Oh, wow. We just did that. Oh, goodness. Okay. No backing out now. That's all right. It's not as scary as it seems. That's for sure. Yeah. This is definitely a bigger transition for us. We're no longer, you know, first, I would say it was a bit scarier being the first time home buyer because you really have no context. You know, you hear stories. You could do as much research as you want, but you don't have that experience. So it was a bit easier going in.

But I think, oh, we're, you know, we're going from a townhouse to a house. We don't know. You know, we had people that would shovel our walk. Now, I guess we have to figure that out ourselves. So there's going to be a learning curve. So anyways, enough about me. I'm just like excited to talk about no yeah you know when someone's like in the thick of it that's all they can talk about of course i'm so excited to have you here um but first um because i know

i mean i've personally had so many conversations with um potential first-time homebuyers or people that are just getting started um you know looking at uh houses. And there's a similar, there's a lot of anxiety, there's a lot of stress and worry. And I think a lot of it stems from just like the unknown and also like, oh, gosh, I sure don't want to make a mistake, because that would be one expensive mistake to make. So when it comes to first time homebuyers, what are some of the things that they should, you know, remember or consider before fully diving in? Yeah, I think there's lots of things to consider, but there's two main factors that I think you really need to put at the forefront before you, you know, get into that home buying journey. Number one would be

understand your budget, understand what those debts are, what, you know, do you have lines of credits, loans, credit cards, some expenses? You need to know what your day-to-day transactions are looking like. So to put a budget together, super, super important. And then the second piece very easily said and kind of addresses your, it can be a scary thing. It's the biggest purchase of your life. You need to build a strong relationship with a mortgage advisor. I think no matter where you go and who you do this with, you need to have a solid foundation of trust and a good relationship with somebody that you can ask candid questions and get a true answer back. Because yeah, not feel like you're asking a dumb question. It's like there's no dumb questions,

especially when you're, like you said, making the biggest financial decision of your life. It's like, you want to have that open dialogue. Yeah, of course. And that goes with anything, right? It's when you have someone that is an expert and that you can bounce ideas off of and just to be able to trust that is extremely important. And I don't think a lot of people do that upfront. We see that all the time is that, you know, people put in on offers first or, you know, without actually understanding what they can afford and what that total financial picture is. And that's one of the things that I would suggest is that when you go to a financial institution, you have a total value picture. It's a holistic approach because it's not just about

the mortgage. It's about your whole financial picture. So that's why I think it's important to get in front of somebody as soon as you can. Yeah. I mean, yeah, that's definitely something that we've, you know, your whole life changes when you get a mortgage. I mean, your cost of living changes and also maybe how you even structure things. I mean, I think a big change for us when we bought our first place and even looking into, you know, now we've bought our second place place we're already looking at how can we maybe reconfigure our budget and our cash flow structure so things are more organized because it just gets kind of more complicated so yeah it's so important um since we kind of touched on that you know this uh and this is like kind of the question that everyone has how on earth can i even afford something depending on where you live

in the country but you know even like especially Ontario every it seems like every city in Ontario has just exploded in terms of uh price point a lot of first-time home buyers feel like it's too late or how on earth can I afford something um how would you go about trying to figure out what is your affordability because it does kind of seem like numbers are a bit crazy but sometimes when you really start putting them together it gives you i mean honestly like especially when we bought uh our recent place i'm like that that's a big number that we just paid but then when you break it down monthly it's it's like okay it's doable but it's it's hard to

kind of digest yeah no i and and like i i totally get that part of it, right? And it doesn't have to be that large honking number, you know, when you're looking at a mortgage and how can we afford it, breaking it down exactly like you've suggested, breaking it down into digestible pieces, right? And so what does that look like daily and weekly, right? I think that's important. The first step is to understand and don't underestimate the power of savings. So saving your money and really rejigging how you do things. Do you need to have that most expensive dish for lunch or for dinner and trying to consolidate? So having a strong down payment is important. Understanding that the government has different programs in place like the first time home buyer, where you can use your RSPs, so your retirement savings plan, as a means of pulling it out and using it as a down payment without any tax implications, right? And some people might say, yeah, but I don't have any RSPs built up. I don't have any money there. There are, you know, in every institution, they offer RSP loans, where I highly recommend,

you know, meeting with a mortgage advisor and understanding a little bit more about it i did that with my own home purchase as well where you know i took out an rsp loan it goes into the rsp 90 days then you can take it out without any tax implications and right now you can borrow or you can take out 35 000 out of your rsps you know if you have two people that are buying a house, a home, then it gets to $70,000. That helps towards your down payment. So it is definitely a great plan to look at. I think that's very, very important. The other thing to think about is not going to the ceiling. Yes, we want to get into the home market, but we see from time to time people going right at the top, and then there's

no more movement afterwards, right? You have to live within the means for sure. But if your listeners want to know what the general, if you don't have much unsecured debt, lines of credits, loans, and credit cards, you can look at about three to four times your salary. So whatever that income is coming in, times it by three to four times, and that's what you're going to be looking at what you're going to be able to afford. All right, good to know. And I know, you know, this is, you know, we see kind of these articles floating around about, you know, usually when you see someone, especially in their 20s, and I'm still kind of like shocked when people in their 20s buy something because we didn't buy anything

until we hit 30. You know, how do they they afford these and usually it's because they get help from their parents and and i think it's i don't know personally because i've had so many conversations with people i know who do own homes and they're like yeah we got help and people are scared to say anything because of the judgment but that i feel like is kind of becoming the norm just with how the real estate market is. It isn't necessarily possible or realistic to try to just save it all up on your own unless you want to wait a long period of time to buy something. So can you kind of speak to that? I know a lot of people think they just get free money from their parents, but there's probably some products that probably exist to

organize that in a certain way, like them co-signing or something, right? Yeah, exactly. We do have multi-ownership programs in place where you can be a joint or co-applicant with family members or friends. So people are absolutely using this and to their advantage, it's becoming more and more commonplace. Getting a gift from a relative is more commonplace now. And we get a gift letter and we have to just understand where those funds are coming from. But otherwise, it's happening more and more. There is absolutely no embarrassment whatsoever. So I would actually encourage people, if you have the means to borrow money from family members, do that because you have

to get into the market. In order to be a player, you got to be in the market in order to enjoy the freedom of having a home ownership. So it is a difficult thing, but you need to leverage the first-time homebuyers plan, leverage, parents or family members that might have the opportunity to lend you money. Because, again, it's going to be it's going to help you in the long run, for sure. Yeah, like you said, it'll kind of cut that time of waiting to get into the market. And one of the things that I always kind of, you know, look back on is like, you know, we have, you know, some friends who, you know, I went to university and then I was broke for my whole 20s basically. But we, me and my husband, we had friends who, they didn't go to university right after high school. They, you know, studied to be in the

trades and started making pretty decent money way earlier than us. And they were very smart with their money because they bought property, like, honestly, looking back like 15 years ago. And I look back, I'm like, gosh, gosh, they own like multiple properties now and they're our age and we just have one place. But that's the other thing. Sorry to cut you off, but that's the other thing to consider too, is getting a financial planner to look at your total financial plan and even the future prospects of what that's going to look like, right? Because it doesn't have to, like somebody can help to hold your hand throughout that process. It doesn't have to be just you alone. And if you're just talking about the mortgage,

it's much more than that. And maybe there is an opportunity to take, you know, if you're looking at two years down the road to purchasing a home, meeting with a financial advisor and thinking about, okay, inflation's at three and 4%. What kind of investments can we look at to get us a return that's going to help us at least cover that three and 4%. So you still have that purchasing power at the end of it, right? Well, yeah, that's a big consideration too, because I feel like I've been having so many conversations with people about like past financial advice was, oh, keep it in cash if you're going to buy something in a year or two. But now it's like, that actually does not make sense, because you're getting a negative return

on your cash because of inflation. And so it actually, you know, it is important to kind of look into, okay, what's going on right now? What advice should we just toss out the window, because it's not relevant? And then yeah, what makes sense? And I've been telling everybody, it's like, it doesn't make sense to keep it in cash you're going to be losing money and especially as you see not just inflation but then also real estate prices how they've increased it's like the only way to kind of keep up with that so your down payment still holds value is to invest it honestly yeah and and just again you got to know your options and you have to be educated in order to make the right decision if you don't know these things and sit and you're right sitting on cash right now, you're losing money at the end of

the day. So yeah, important to meet with somebody for sure. Yeah, absolutely. So let's kind of talk some of the particulars of a mortgage. There's a lot of, I think, you know, acronyms and buzzwords and, you know, just jargon when it comes to mortgages that when you're not familiar with it, they're like, what the hell does that mean? So, you know, we've got, we've got our term, we've got our amortization, we've got our interest rate, all these things. I kind of wanted to dive into a few of these just to clear things up so they're less scary. So let's kind of start with the interest rates. Now, typically, basically your kind of options are you can get a variable rate, a fixed rate or a flexi rate which is kind of an interesting uh combination you know now you know for me like i when we first bought our place i'm like uh i i thought you know and they

did um i'm like interest rates have been low for a long time they're going to go up let's lock in this uh interest rate so we got a fixed rate now things have kind of changed we actually went with a variable this time around and but you know there is the risk that interest rates will go up, and they most likely will. And so there's a lot of things to consider. What should people know about these different types of interest rates? How do they work? I think a lot of people aren't sure, like, what does a variable rate do? And how do you choose the right one for you? Yeah, no, it's a great question. So fixed rate mortgage or fixed rate interest rate is a fixed rate. It doesn't change over the term of the mortgage. So if you book a five-year term for five years, that rate

doesn't change. Your payment doesn't change. Typically, that is a bit of a higher rate than what a variable rate has been. And historically, a variable rate has been better. So a variable rate fluctuates. And so that's based on our prime rate or a prime lending rate and some basis points, either plus or minus. And if the prime rate changes as the Bank of Canada is starting to slowly indicate that in the future, in the coming years, that it is going to be rising, it's something to consider. But the first thing I would say is, what type of person are you? Are you the peace of mind kind of person where I'm that type of person, I'm a fixed rate type of person, I like to sleep at night, I like to know what my payments are, and done for those five years. If you're a person who likes to get the advantage of a lower rate now, and will monitor it and see what the future holds,

then a variable rate might be the better thing. It really depends on also the advisor that you have and how in tune they are with the market and where it's going, right? Like I said, the Bank of Canada just yesterday or two days ago came out with saying that, listen, we're not going to change the rates now, but just let you know next year, we're going to be starting moving a little bit quicker than what we think. And so it's something to consider. Also in our applications, in any financial institution, there is a stress test already put in place, meaning that you're qualifying at a higher rate, 2%, give or take, higher than what the rate you're going to get to ensure that if rates go up, you still have the ability to pay.

So the fixed rate, the variable rate, there is at some institutions a flexi rate where you can have a variable rate inside of a larger product, larger mortgage product. Those can be, you can take advantage of those ones. If you'd like to separate, you know, like say you do a home renovation and you take out $50,000 and you want to put it aside as a certain, you know, rate and payment, that would be a flexi rate option. But really it comes down to those variable or fixed rates. Okay. Awesome. Now I think that's helpful. Now you also kind of mentioned the term term. And I think a lot of people get that confused with amortization because they're both lengths of time that are super important for your mortgage. Now, I think in general, I think that lot of people get that confused with amortization because they're both lengths of time that are super important for your mortgage.

Now, I think in general, I think that the kind of typical mortgage term that people get is five years, but you can also get a shorter term. What should people know when they're considering what term I should get for my mortgage? Like, how do you choose? Should I do a five or a four or three or what should I do? Yeah. And again, a great question. But the difference between a term and amortization,

amortization is the entire length of the mortgage. So typically that's going to be either 25 or 30 year amortization. That's how long, if you can continue with this payment program, how long it's going to take. The term is a shorter period that you're booking in the rate for a specific amount of time. It can be as low as six months all the way up until 10 year, you know, one, two, three, four, five, six, seven, eight, nine. The first question I usually ask people is, are you planning on staying in your home? Because if you have any inclinations that you're going to be selling your home in two years or three years, you're not going to book a five-year term because then you might have to

break the mortgage, which you really don't want to get into. So if you're telling me that you're not going to, you know, you might be selling your place in two years, I would look at doing a two-year term. And so that's how I would determine what it is. If you're saying that, you know, no, now is a good time to put in a five-year. And even with the indication that rates are going to go up, even looking at longer terms to lock in a rate. No, yeah, absolutely. And since you mentioned amortization, that's another thing people, you know, that's a big deal. It's like sometimes you look at these like, oh, what's the difference between a 30 year or 25 year amortization period? Well, five years. And so, I mean, you know, five years is a long time, right? I feel like everyone

I know either does, yeah, the 25 or the 30 year. I don't know too many people that does shorter times. And, but I think, you know, even when we were deciding, okay, what amortization period should we get? So with our previous mortgage, we did 25 years. And it just, it does kind of cut me because it's like, oh gosh, we had 25 year amortization period, but we did, and we also talk about payment structure. We did accelerated biweekly payments.

And then even at the end, I think we're doing some, you know, extra, you know, payments onto our mortgage. And when we had to renew our term in the summer, because five years had been up, and it showed us how much was left on the length of our loan. And it said just under 14 years. I'm like, oh my gosh. So like payments, super important. But here we are buying a bigger, more expensive place going back up to a 30 year. But there was a lot of things that we talked about and discussed, like why would we, you know, some people, again, like people that are like, oh, I hate debt. I want to pay off my mortgage as soon as possible. You know, it sometimes doesn't necessarily make sense depending on what phase in life you are. So for us, a big consideration was cash flow,

we wanted to make sure that we felt good as we ease into this new phase in life, we have this, you know, new expenses that we don't quite know all the utilities and all the things that will pop up, we want to give ourselves some breathing room. But you know, what are some other things people should think about when they're considering which amortization period makes the most sense? Because it will have a big impact on your regular payments. Yeah. And it's a loaded question for sure. But what I always like to suggest is that if you qualify for a 30-year amortization, do that. Because that is going to be the most minimum payment that you need to make. Now, if you can afford a little bit more in your payments, like you've done with your bi-weekly accelerated payments, you can still do that with the 30-year

amortization to actually lower what the years it's going to take to pay off your mortgage. So say, for example, a 30-year amortization is $3,000 a month, but I can do $3,500 to get it to a 25. You pay your $3,500. But if something goes on in the future, say you lose your job or say that you fall ill or that you need a little bit more cash flow, you can always revert back to the 30-year minimum payment of that $3,000. If you lock in at the 25 year amortization, then that becomes the minimum payment, right? So I think that's important to consider for sure. Accelerated, when it comes to the payment pieces, right, it really depends on what the need is. Sometimes, and I really like that you hit the life stage piece because it really does depend on where you are in your life. I have a young family right now,

cash flow is very important to me. So it might be prudent for me to maybe not pay as much on my mortgage right now so that I have the ability to live the life that I want to provide for my family, right? And hit some of those other goals like, okay, we've got a college fund going on and investing for retirement and meeting all those other requirements. I also like to explain to people that the old adage of pay off your mortgage first, pay off your mortgage first. It's always sound advice for sure to get rid of your debt, but I think there's a lot of moving parts there.

The way that I like to explain it to people, if you have $100, $50 goes towards your debt. So that could be your mortgage, okay? $25 goes towards saving for now, which it could be like a TFSA and like for a trip in the next couple of years, and then saving for later, like your RSPs in retirement. And because I think if you neglect one of those areas, you know, you're going to be behind the ball a little bit in certain things. So you might not be able to save for now if you're dumping everything into your mortgage.

What about the future? what about that cash flow so i think you know 30-year amortization but you know pay as much as you can because it does hit on the principle a lot quicker well yeah the kind of the advice that we got is like well again this gives you some flexibility and you know within our and lots of mortgage contracts there is the avail of the opportunity to do some prepayment so maybe you get a bonus at work and you want to add another extra payment or something onto your mortgage so so it gives you more options so that's kind of yeah what made the most sense for us but yeah i want to touch on that because that's another question people have it's it's definitely

some old advice we got from our parents or grandparents and it's not bad advice exactly but the idea is like get rid of your debt. Yeah, we will definitely pay off your debt. But yeah, like you mentioned, it's so important to from for me, and someone said this a few years ago, so we stuck in my mind. You know, when it comes to, you know, thinking about investing, diversification is a really important element. That means investing in lots of different things. So you're spreading your eggs in lots of different baskets. Why would it make sense to put all of your eggs into one asset, which is your home? Because you can only realize that capital if you sell your house, or I guess if you get some sort of a loan that is taking the equity

out of your home. But it's important to, yeah, like you said, meet your debt obligations, but making sure you're diversified in terms of your money too with cash savings, know investments for your other investment goals like retirement so you don't end up in a situation where you have a paid off house and nothing you're you know 40 or 50 and you don't have anything safe for retirement you know what are your you know when you sit down with a financial advisor a good financial advisor is going to get to know you and understand what your financial goals are all of them not just the one i'm not only helping you with the mortgage and and what your financial goals are, all of them, not just the one. I'm not only helping you with the mortgage and purchasing your dream home. I'm also helping you set up for those vacations if that's on the radar or for that nice new car if that's on the radar or what do you want

to do when you're retired? So it all comes together. And I, and I think what, what are a lot of people do is that they, they put it in compartments and they try to separate things and it's not a separation. It's supposed to be all together holistically. You got to look at it. Yeah. Yeah. And like I always say, personal finance is personal. Like even for me, it's like, I feel like there's so much pressure on myself as someone who's been in this space for so long and like gives people, you know, tips and stuff. And I talk about money and I want to help people but then that's like well i've got my own financial life and and considerations i'm like i always don't want people to judge me for for my but it's like you know what what can i do like everyone's personal financial situation is their own and they have to

make the right decision for them and that's what that's what they got to do um another thing kind of just talking about for when people are thinking of getting a mortgage, and I think this is so important to talk about is what are some potential mistakes or no-nos people should avoid? So I'm thinking, you know, I see a lot of these things on like Instagram Reels. There's like a bunch of realtors that pop up on things probably because the algorithm knows I'm looking for a house of things that you should not do. Like, oh, when you hear a client just bought a new car and you're like, but we're looking for not do. Like, oh, when you hear a client just bought a new car, and you're like, but we're looking for a house. Like, why did you just take out a loan for a new car? Like, so what are some things that you should maybe hit pause on or not do if you are looking to

get a mortgage and buy a home? Yeah, I think that could be one of the first points too. Don't buy a new expensive car. Well, everybody, everybody based on their income has a certain amount of credit that's available to them. How you want to use that credit is going to be up to you. So if you want to have, for example, a $500,000 mortgage, you might not be able to – or say you qualify for $500,000 in debt totally. You buy a $100,000 car on loan. You have a $50,000 unsecured line of credit and another loan for $50,000. Well, that's reduced it by $200,000. So now your ability to get a mortgage can only go so far.

So I think that if you're thinking about buying a house and having a mortgage, making those big purchases or getting into further debt, picking up that other credit card and putting $10,000 on it is going to have an effect on the amount of credit that's available to you. So that's a great point. Yeah. I mean, one of the things that I'm holding off on until everything is done is I have a credit card that I want to cancel. I can't cancel it until it's all squared away because I don't want it to mess up my credit score and all that kind of stuff. That's right. The other thing I wanted to mention too, though, that, you know, some of the pitfalls are some of the things that we see at the bank is that people go in with firm offers. Now I understand it's a crazy market out

there and you actually can't buy a place right now without a firm offer. Yeah, absolutely. Before you put in a firm offer, you need to have a pre-approval put in place. You need to go to any institution and get a good idea of what that looks like, okay? Because you can't, you know, if you're going in firm and then you go to the institutions and they can't lend you the amount of money that you need, you're legally obliged, yeah, obligated to fulfill that commitment, right? And so be very, very careful with that. The other thing that I need to say too, is that, you know, there's a lot of bidding for homes. Okay. And it keeps on going higher and higher. So if it's listed at 900,000, it's going like my brother just bought a place.

It was 900,000 listed. It went for 1.2. So it was that much more. So we can only lend whatever, 80% on the value of, 900 000 the extra 300 000 that my brother put in he's got to come up with that money himself so if you for your listeners out there if you are going to be over bidding on a place understand that that money's got to come from your own resources not from any lender for per se yeah no it's it's it is weird with and i mean that's exactly what happened to us it was listed for one price we obviously played way more and it seems like kind of the the trend that's going on i think everywhere but especially in toronto and i see this in vancouver as well as

places are listed for below what their value is because they want a certain amount of money and that's just like you know i miss the days where it's like this is how much we want this is the list price is how much we want now it's like we're not gonna tell you how much we want you have to guess but you do have to like you said like when we even you know talk to you know our professionals and they're like listen like you're obviously paying more than asking and so the bank may want to assess the you know reassess the value and all that kind of stuff and so you're gonna are you going to be able to pay if there's a shortfall? And obviously, we were able to.

But also, part of it, too, was we did put a significant amount down, and that also did help kind of how that all kind of worked. But yeah, that's an important thing. We're in a weird kind of market, so you need to be aware of that. One thing you did actually mention, and this is so important, I always tell people, before you even get a realtor and look for houses, oh my gosh, you need to get your mortgage stuff set up. You need to be pre-approved. Because how else will you know if you can actually afford this? But there's a lot of confusion I find between a pre-qualification and a pre-approval when it

comes to a mortgage. Sound very similar. They are different things. Pre-approval is the important thing. That's what you need in order to buy a home. But a lot of people get, say, a pre-qualification. They saw an ad or something, and they think they can now buy a house. Do you want to kind of explain the difference between the two? Well, you know what? I would explain the difference between a pre-approval and then a live deal. Because a pre-approval, and even a pre-qualification, but we don't do any of those, but I will focus on the pre-approval. That is a guideline. It is not, you're going to see on the conditions there. It's not, once you have the property in mind, then we have to go through the full adjudication process to ensure that we're

lending to the right property for the right amount. So a pre-approval is a guideline. So I think that's one of the key distinctions that people need to make. It's not set in stone when you get pre-approved we still but it's likely yeah it's it's it's that's the other annoying thing when you're housing you're like everything's kind of ambiguous you're like i mean it's probably this but you know we'll see yeah it's it's true but again like if you get pre-approved for a five hundred thousand dollar mortgage and uh you know the place is coming in at much higher it's going to be difficult to go higher than that, right? So it's good to have something like that in place. The other thing that I just wanted to mention as well

is when you come around hidden costs or pitfalls, is that people don't have enough money for their closing costs, typically, because they don't think about the closing costs. And the number one factor in a closing cost is the land transfer taxes and land transfer fees. That can be so expensive, depending on where you live. On a million dollar home, you can look at it around three and 4% just for that piece. So if

it's a million dollar home, you're already looking at 30 to 40,000 of your own money, can't be borrowed, that you need to give to the lawyer so that they can do all of the background land transfer registration changes, right? And so that's something that people need to really think about there. And there's other costs that are also involved too that people need to think about as well. Oh, yeah. I mean, for us, we developed, you know, we definitely looked at online resources, but developed our own little spreadsheet that's, you know, as well, you know, we definitely looked at online resources, but developed our own little spreadsheet that, you know, as well, you know, we were in there all the time whenever we were looking at a place and being in a place where like, okay, what would our what would all the things cost? But I mean, it's helpful to really calculate those things in advance, because even when we were, you know, got our kind of final numbers, we were we were really close, but it wasn't 100% accurate. And so it is so important to pre-plan because yeah, you may be like, oh, we don't have the money. And then you're in a pickle. You got to build in a buffer there too, right?

Yes. You always need more money than you. That's always the case. But you know how when you're doing a construction project and you have to account for 10% waste or 10% you missed the cut or 10 or 15%, it's kind of the same thing is that, yeah, land transfer tax might be 30, might be 35. Your home inspection might be 300 or it could be 500, right? Your real estate agent could be, or your real estate lawyer could be $1,000 or $1,500, right? And so to go on the conservative side and build yourself a bit of a buffer is very important as well. And then like there's little other costs that people forget. For us, we sold first and we bought it. So there is a gap between when we can get into

our new property. So movers, storage, or maybe you want to hire a cleaning company. There's so many things. So it's good to have, again again some buffer money for those things that you're like oh i forgot about yeah i'm really i'm really glad that you said you had an excel spreadsheet like i mean i think that oh yeah i think being organized is super super important and then you know go line by line and you get a great understanding because if you just do this by the seat of your pants uh it's going to go by so quickly you might not have a good understanding. And I think it's important that you know this is the biggest purchase of your life and you're going to be in this home. You should know what's going on.

And it's very intense, especially with the markets kind of everywhere across the country right now. I mean, for us, it felt like it took a year, but we sold our place and bought a new place and looked and bid it on seven different places or something crazy within the span of one month, one month, it happened very quickly. So it's a good thing that we had that kind of foundation. And, and again, we, we really did do our research and knew what we were getting into, but it's, it's intense. So you need to be prepared. So I know we've talked a little bit about, you know, a lot about first time home buyers.

I wanted to just kind of touch on for anyone listening who is like me, who's not a first time homebuyer, existing homebuyers that, you know, there's lots of things that I mean, you know, we were new to experience. Now, one, actually, I think this is really important to kind of touch on is, you know, we talked about the mortgage term. So and I kind of touched on this earlier as well. So we had a five year term, it expired. And so we were up for renewal. I think a lot of people assume you need to automatically renew with your current lender, just like, okay, let's get another five years. But you actually have options, you can shop around, you can go to a different lender, especially to if that means maybe getting a better rate, or it's just a better, you know, institution for you. Do you want to kind of share

what does that look like? And how how far in advance of your term expiring should you kind of start, you know, the conversation with someone to see, hey, should we move places? Yeah, great question. So 120 days for a short answer there. So within four months of the maturity date, you should be starting to look into what's going on. Go to the institution that you already have the mortgage with and say, what's the best rate? What's the best offer that you have for me? Because at that time, you can early renew without any kind of fees or penalties or anything like that. When it comes to costs and fees of setting up a mortgage, at a renewal, if you're renewing with the same institution, there's going to be no fees unless you're increasing the mortgage amount, where we

might have to do a new land registration charge. If you're a new home buyer, the costs are going to be the appraisal, which is between $3,000 and $, um, uh, your legals that are going to be done through the real estate lawyer, uh, which can be up to 1500. That's how much it's going to cost just for the mortgage piece, right? When you're renewing again with the same institution, um, you won't have any, any fees associated anyways. Another question I've gotten, um, is, you know, let's say you, you know, most people don't do it like us where, you know, we sold first and then bought second. And so we get the money from our sale and then we got the money to buy the house. So we're actually

pretty lucky in that respect, even though, I mean, you know, the cost savings are like, oh, there's gonna be a whole month we don't have a mortgage. We're going to be renting a place. So it all kind of gets eaten up somewhere. But a lot of people are like, okay, but what if I want to buy a place first and sell second? How do I, you know, and I don't get the money right away. How do I bridge that gap? How do I pay the house that I just bought? Yeah. So the key word is bridge, exactly what you just said, right? so a bridge loan um now institutions offer that especially if you're um going to be having a mortgage with them right and it's typically up to about 120 days so you can get it up to four months uh difference anything beyond that might

be more difficult where you know you might have to have that buffer that you're covering that buffer but there are bridge financing options available at all the institutions for sure. Okay. So that's something that honestly, like I didn't really know existed. And you would only know. I feel like a lot of people didn't know that. Yeah. You would only know that by having a strong relationship with an advisor.

Absolutely. Okay. One last thing. And then I'll, I kind of want to wrap this up because I mean, oh gosh, I could have you here forever because I love talking about this topic. But another thing that I think a lot of homeowners maybe don't know too much about, or they don't really know how to approach it is, you know, people talk all the time about building up equity in their home, but you know, you could potentially use that equity for another purpose, like an investment. I know a lot of people in who, you know, invest in rental properties and things like that. That's one thing

they do. Can you kind of talk a little bit more about like, how would one, you know, what are some of the options or products available in order to use the equity you've built up in your home for a different purpose? Yeah, exactly. So a secured line of credit. So a line of credit that is secured against your home is a great option. Many, many, many people have, you know, the mortgage set up and then they want to do a home renovation or they want to help out their kids or they want to do an investment. This is considered a refinance because you already own the property. It's not a new purchase. You can borrow up to the 80% mark. So say your mortgage is at, loan to value is at 70% or 65%, we can loan up to that 80% and give you a separate secured line of credit

that you can use at will to do renovation or investments. I've seen a lot of people use it for investment purposes because, again, it depends on your relationship with your financial advisor and if historically they've been seeing 4% and five percent returns, but you're borrowing at two percent makes a lot of sense. Right. But you do have to be fairly financially savvy to be able to, you know, monitor that and make the right decisions and especially the investment side of it. But, you know, it's a great option because typically you're in the middle of your terms of a mortgage and you don't want to break that. So having a secured line of credit and the flexibility around it is very good. You pay, it's still available, right? You use it, you pay, it's available. Whereas a mortgage is a term reducing product. So once you pay, it just keeps going down. Yeah. Yeah. I mean, but yeah, like you mentioned, it's important to remember the risks involved because you are using debt as a tool, but also to remember when you're budgeting and considering, oh, maybe for a home renovation, it's like, you know, you need to pay that money back.

So that money has to come from somewhere. So you also need to calculate, okay, even though we're borrowing, how are we going to pay those payments so we can pay it off? People get excited when they buy a house. They're like, let's make renovations. You're like, let's just calculate the numbers, take our time. That's true. That 30,000 renovation after interest and you're borrowing, it might turn into 35. So put that in the budget. You're right. Yes, exactly. Okay. So before I let you go, what are some kind of last key points or takeaways you would like listeners to kind of leave off with after listening to this episode? Yeah, of course. If you have a pen and paper,

I think there's six things that you really need to consider. Oh, yeah. Love it. So prepare a budget detailing, you know, your monthly debts and income. That's important to do. Have that spreadsheet like you've suggested. You know, Number two, meet with a mortgage advisor immediately to understand how much you can afford with regards to a mortgage and what does your total financial picture look like at this current life stage. Three, understand the cost of home ownership. So things like utilities, property taxes, maintenance and repair, what the lawyer fees are going to look like, the home inspection, all of those things. And again, you can have that great conversation with a mortgage advisor for sure. Four would be how much of a down payment are you going to be bringing to the table? And do you need to tweak

that number depending on how much you've bid on a home? Or are you borrowing funds as a gift from someone? So you got to think about that too. Make sure you find a reputable real estate agent and real estate lawyer. There are a lot of people out there that claim they do a lot of work, but they might not work as hard for you. So you definitely, referrals is a great way of figuring it out because it's a firsthand impression of that person. So I think that's important. And lastly, even though we're typically in this day and age, we're going in with firm offers and stuff like that, I still do recommend a home inspection and a condition of financing on these properties, right? Because, you know,

you want to make sure you can afford it and that you can get qualified for it and that you want to make sure there's nothing wrong with, you know, the electrical plumbing and all that kind of stuff. Sometimes it's a gamble and I get it, but it depends on what type of person you are. But those are the six things that I would really focus on. Those are great. Yeah, it is tricky doing some of the conditions, I will say. Yeah, I believe it. In my experience. But with the home inspection, especially, there are ways. I mean, for us, there were lots of properties where it's like we saw the place, we wanted to put a bid in immediately, and then we got the home inspection the next day. So it is possible to kind of do a quick turnaround.

But yeah, some of the things, like I always kind of share, you know, we did not get a home inspection because, again, five years ago, it was still a hot market when we bought this townhouse, did not get a home inspection. And a year later, we found out from a plumber, because we had a plumbing issue. He's like, oh, you have Kytecek plumbing and we're like what what's that it's uh plumbing that uh some condos uh lots of condos got during a certain period of time in like the early 2000s that explode so you need to pay for their replacement so that cost us uh six thousand dollars you're so right i wish we knew that in advance. And sometimes from what I understand, some institutions won't even provide a mortgage for people who have that type of plumbing. Yeah. So it's good to know those things in advance. That's for sure. So thank you so much

for being on the show and for sharing so much wisdom. I think this is going to be so helpful for so many people. I know there's lots of great resources on Alterna.ca. Can you kind of point to some of them? You know, I know there's a calculator. What are some, you know, things, you know, after this episode, people may want to continue their education. Where should they go? I definitely think the mortgage calculator at Alterna.ca is very intuitive. And I think it's a great start. So if you're wondering about, you know, I'm in the market, I want to see what I can afford, go on to alternate.ca, go to the mortgage calculator.

As well, we've redesigned our website to be a little bit more user-friendly, which has been a welcomed change. And I would also challenge everybody to go on there and look at other products and services that are out there because again,

it's the total financial picture. And so when we talk about a secured line of credit for investment purposes, well, what does, as an example, Alterna has a great wealth platform. So how can you meet with somebody and talk about that too? So there are great tools and resources at alterna.ca. We have a great, great institution and people who care. So I think it's good to get in front of us because we love building relationships with people. Amazing. Well, thank you again, Michael, for being on the show. It's a pleasure having you. Thank you, Jessica, very much. And that was episode 301 with Michael Borelli. Again, he is the branch manager at the Bay Street

location of Alterna Savings. And if you want to learn more about mortgages or credit unions or Alterna Savings, we'll highly recommend you go to alterna.ca slash more money mortgage. Once again, that's alterna.ca slash more money mortgage because right there, there is a whole, it's a wonderful, beautiful landing page that has so many great resources, including mortgage calculators, guides on to buy house and renewing your mortgage. You can also get in touch with a mortgage professional there. So many great things. But also you can just go to alterna.ca as well. And they have a plethora of information and resources for you to check out. So although I have kind of come to the end of my house hunting

journey, thank goodness, I will tell you it was, it was literally only a month, uh, from, well, like let's give it a whole month and a half from, uh, you know, signing the contract with our, uh, real estate agent to, you know, putting our place on the market, selling it, house hunting, and then finding our place. But honestly, it felt like six months. It was, it was a crazy situation. It was, uh, it was no ordeal and I'm exhausted and I cannot wait until the new year when we can get out of this place and we'll be in our new place. Actually, we're going to have to be out of this place at the end of November. So there's definitely going to be some future podcast episodes where I'm no longer going to be recording in this home of mine. I'm going to be in an Airbnb for a few weeks

in between because we're going to be kind of displaced. Then I'm going to be home in Vancouver for the Christmas holidays. And then beginning of January, literally no joke, the day that we fly back from Vancouver, that is the day that we actually get the keys for a new place. How kind of cool like I'm actually really excited about it. How cool is it that we get to really start the official new year in Toronto in our new house. And of course, I will be sharing more specific details about my experience and just like things that I learned, maybe some mistakes that we made along the way or some things that I may not recommend, but they kind of worked out for me. I mean, I'm going to share that all in a future solo episode, so you can look forward to that. So make sure to wherever you're listening to this podcast,

make sure to subscribe. Also talking about subscribing, make sure to check out my email list. So actually, I mean, check out my email list. Well, subscribe to my email list, you can go to jessicamorehouse.com slash subscribe. But you can also access here's something better, more interesting. You can access my full free resource library, just by going to jessicamorehouse.com slash resources. If you sign up to my email list, then you'll get like an email that says, you know, welcome to my email list and I'll have details on how to actually sign that up. But you can also just go to jessicamorehouse.com and find the details there. But there's a ton of amazing spreadsheets and checklists and guides, but one of them includes some tips on, you know, getting ready for your

mortgage and just some key terms and things that we talked about in this episode that you may need a reminder of like, like, hey, wait, you talked about variable and fixed rates, what's that about? Or, you know, a term versus amortization, all that kind of stuff. So make sure to check that out. Also, in last week's episode, which was about wedding planning, I also added the wedding budget spreadsheet. So if you're also getting married or not someone who, you know, is and they want a spreadsheet to kind of organize all of their, you know, money stuff for the wedding time. I've got a spreadsheet in there. It's brand new. But there's so much stuff. So you can check that out. Also, of course, in case you don't know,

besides this wonderful podcast, I also have a YouTube channel. So if you go to Jessica Morehouse.com slash YouTube, or just Google Jessica Morehouse in YouTube, you will find me and a bunch of amazing videos. And what I'm very excited about, especially like I cannot honestly wait to get into the new place because it has so much more space. And it has a room that I have already nicknamed the YouTube room. It is this kind of weird room in the basement that doesn't have any windows. And when we saw it, I'm like, what is this? And my husband, Josh, he's like, yeah, I don't know if I want this for my studio, because he's gonna be moving back into the house to work. So we're both gonna be working from home. So that's very exciting. But

I'm like, you know what, actually, that'd be a perfect YouTube room. So yeah, I'm very excited. I'm gonna honestly, I'm gonna make it a'm going to honestly, I'm going to make it a big priority to at least do one video per week, if not two videos per week. Well, we'll see. We'll see. But anyways, I've got a lot of great videos on my YouTube channel right now. So you can check out JessicaMorehouse.com slash YouTube. And last thing I will let you know about in case you don't know, I'm on the gram. No one calls it that. No one calls it that. I am showing my age, but it's the Instagram, the Insta, the IG, I don't know what people call it. But anyways, if you go to at Jessica I Morehouse, that is where you can find

me. You can also follow the podcast at more money podcast. I, you know, always share all the new episodes. But I've been having a lot of fun on Instagram lately with reels. And I've got my sister Sarah, who's my virtual assistant to be, she's helping me with my Instagram moving forward. We kind of, you know, talked about moving forward, what do we want it to look like and our vision and stuff like that. So I'm very excited to see what it does. But basically, here's why I'm telling you to check out my Instagram and follow me. My goal, one of my goals on my goal list is to get to 10,000 Instagram followers before the end of the year. And we're not quite there. We're like 1400 people away or

something like that so if you could do me a big favor and check it out and like it and tell your friends to like it that'd be cool because you know then i could check that off my goals list and that would feel really nice anyways uh thank you so much for listening to this whole episode and me rambling um i will be back here next wednesday with a fresh new episode of the more money podcast uh thanks again for supporting this show and getting us to 300 episodes. And of course, a big shout out to my wonderful podcast editor, who also helped me get to 300 episodes with so much less stress and anxiety because I used to somehow for some crazy reason thought it was a good idea to edit these myself. I don't know. What was I thinking? What was I thinking? So thanks, Matt. Anyways, thank you so much for

listening again. Have an amazing rest of your week and weekend. I will see you back here next Wednesday. This podcast is distributed by the Women in Media Podcast Network. Find out more at womeninmedia.network.