Financing 201: Changes in the mortgage industry that affect Real Estate Investors

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www.volitionprop.com
Financing 201: Changes in the
mortgage industry that affect
Real Estate Investors
March 29, 2023

@volitionproperties
Agenda
And yes, the Meetup will be recorded and posted on our website!
www.volitionprop.com/mastermind-meetup/
6:30 - 7:15 pm Volition Updates and Ming’s Market Minute
7:15 - 8:00 pm The Main Event!
8:00 - 8:20 pm Networking Break
8:20 - 9:00 pm Mortgages continued and Q&A
9:00 - 10:00 pm Wrap Up and Networking

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Housekeeping Items
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● Cell phones: Put on silent mode and step out if you need to take a call
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E-mail info@volitionprop.com or use the QR code

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Common Myths about Toronto:
"Investment Properties don't work in Toronto"
"Cashflow doesn't exist in Toronto"
"Investing in Toronto means that you are buying a condo"
"Toronto is too risky"
“Toronto is too expensive"

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What’s News?

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CMHC - Canada’s Housing Supply Shortage

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Ontario

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Ontario
“The following chart
shows that the housing
stock-to-population
ratio is declining in
Ontario if current
trends persist. This is
worrisome as this is
where a large portion of
Canada’s population
reside. Much more
housing supply is
needed in Ontario.”

@volitionproperties
● 1.85MM new homes in 7 years
● 30 Aurora’s
● ~4.3 Aurora’s a year

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Underused Housing Tax (UHT)
Do you own properties in a trust, corporation, or are in a JV/partnership?
If you owned residential property in 2022, you need to determine if you are a:
1. Excluded Owner
Citizen or permanent resident of Canada, unless you are an owner of a property as one of the structures
identified below; or,
2. Affected Owner, which includes:
● Non-Canadian citizen or permanent resident
● An individual who owns a residential property as a trustee of a trust
● An individual who is a partner of a partnership that owns a residential property
● A foreign corporation
● Canadian private corporation
Affected owners are required to file by April 30, even if they are exempt from paying the tax.
Disclaimer: Speak to your accountant or tax professional to see if this applies to you!

@volitionproperties
Sneak peek:
Volition’s Pick of the Week!

@volitionproperties
Our Pick of the Week - 79 Hillingdon Ave
Why?
Perfect house hack - great example of our duplex strategy
What we like about it
● MPAC Duplex - helps mortgage qualification
● Distinct units: main + basement 2B /1B and top floor 1B/1B
● 7 min walk to Coxwell TTC station and Danforth amenities
● Turnkey, nicely renovated with parking
● Tenants on month-to-month leases
Considerations
● List price: $999,000
● Offer date: Tuesday, April 4 at noon
● 24 h notice for showings
For more details: speak to our team or e-mail ming@volitionprop.com

@volitionproperties
The Main Event:
Financing 201: Changes in the
mortgage industry that affect Real
Estate Investors

@volitionproperties
Please welcome: Hugo Dos Reis, Vine Group!
Hugo Dos Reis is a Mortgage Broker and Founding Partner at Vine Group, one
of Canada’s leading mortgage companies in volume and the #1 team at
Mortgage Alliance Canada for the past five years.
With 12+ years of experience in the financial sector and a Bay Street Alumni,
Hugo and his team lead investment financing solutions for clients across
Canada. Hugo has provided financial planning education presentations to
thousands of investors through seminars and workshops, has authored
numerous articles, contributed insights to several news outlets and hosted a
financial news segment for the multi-unit rental sector.
His signature client-focused approach, value-added advice, and background in
financial planning are what have helped Hugo with his success year over year.
Hugo’s philosophy is to “take care of your clients, and they will take care of you.”
In his spare time, you can find Hugo at one of Toronto’s many restaurants
enjoying all things food and wine with his wife or at one of the local parks
burning off some energy with his two young daughters.

F I N A N C I N G 2 0 1
C H A N G E S I N T H E M O R T G A G E
I N D U S T R Y T H A T A F F E C T R E A L
E S T A T E I N V E S T O R S
H U G O D O S R E I S
M O R T G A G E B R O K E R &
F O U N D I N G P A R T N E R

AGENDA
Headwinds and opportunities
Proposed OSFI changes
Reverse mortgages solutions
Blueprint approach to real estate investing
Trends and interest rates
General Q&A Session

HEADWINDS & OPPPORTUNITIES
HEADWINDS
GTA Real estate values are down on average 20% (Feb 2023 YOY)
Bank of Canada (BOC) has increased rates by 4.25% since March 2022
PRIME rate is currently 6.70%
With higher stress test borrowers qualify for est. -20% LESS

NEW MORTGAGE
QUALIFYING INCOME
MORTGAGE AMOUNT AVG. 2023 ANNUAL INCOME NEEDED
$250,000 $65,000
$400,000 $95,000
$500,000 $125,000
$750,000 $185,000
$1,000,000 $230,000
*Excludes rental income

OPPORTUNITIES
Buying real estate at a discount of 20%+
More distressed properties coming to market (as a result of cash-flow restraints)
Market is much more balanced than early 2022 and 2021

Purchase price
(detached homes)
$1,440,000 February 2023
$1,700,000 February 2022
$260,000 Saving on Purchase Price or almost 15% less
Required
down payment
(20%)
$288,000 February
$340,000 Today
$52,000 Savings on funds required for down payment
Total monthly
mortgage payments
$5,725 / using average rates in February 2022
$6,495 / using current average rate February 2023
-$770 total monthly payment differential*
*-1% rate drop brings monthly payment differential in line.
2yr term used as benchmark
DATE THE RATE, MARRY THE HOME

OPPORTUNITIES
How to qualify with higher rates when banks say NO:
“B” lenders or Alternative lenders
Common sense lending approach
Allow for higher qualifications
Higher rates
Average 1% fee charged
Weaker or bruised credit friendly
BFS friendly

$750,000 LOAN AMOUNT
“A” LENDER Alternative Lender
Income Required $180,000 $150,000 (stated)
Actual Income Declared $180,000 $50,000
Monthly Payment $4,575 $4,750
Est. Tax Cost $59,000 $7,500
Interest Cost over 12
months
$45,960 $48,590
Fees $0 $7,500
Cost over 12 months $104,960 $63,590
DIFFERENCE OF $41,370

OFSI CHANGES
PROPOSED CHANGES(under consultation)
1.GDS/TDS restrictions
Introducing a “lender level” limit that would
restrict lenders to a certain volume of loans
that exceed a “prudent” threshold.
Applying more stringent rules to non-insured
mortgages to keep ratios more in line

OFSI CHANGES
PROPOSED CHANGES (under consultation)
2. Additional Stress Tests
Currently stress test is contract rate + 2.00%
OSFI looking at creating different stress test
based on risk, term

OFSI CHANGES
Good news is that 99.86% of Canadians
are current on their mortgage with some
of the lowest default rates in world.
Consultation period ends April 14th, 2023
so any changes to be announced 2nd half
of 2023.

OFSI CHANGES
HELOC CHANGES 2023
Effective Oct 31st, 2023 (for most lenders)
Re-advanceable mortgages will be capped
at 65% LTV - (currently 80% LTV).
Existing re-advanceable mortgages will be
reset to 65% on renewal
Can refinance up to 80% but most be as
mortgage

REVERSE MORTGAGES
Access money from your home without
selling or any monthly repayments
Minimum age is 55 years
Max LTV is 55% (subject to age, property
location and value)
Interest is compounded and added to
original balance.
Current rates 6.50-9.50%+
Mortgage is paid out with sale or death.

REVERSE MORTGAGES
E.G.: $1.5MM PERSONAL RESIDENCE
No mortgage
70 years old
Max borrowing est. $600K

REVERSE MORTGAGES
ADVANTAGES/STRATEGIES
Mortgage doesn’t require monthly
payments. Better cash-flow
Tax-free equity take out. No impact to
existing government benefits.
Can receive lump-sum + monthly
distributions
Can be used to invest/gift for down
payment
Retire immediately

REVERSE MORTGAGES
Misconceptions:
Equity is eroded with interest compounding
and non-payment.

REVERSE MORTGAGES
CASHFLOW ANALYSIS :
$1,500,000 PURCHASE
HELOC Reverse Mortgage
Down payment ($300K) $1,675/mth $0
Mortgage ($1.2MM) $7,150/mth $7,150/mth
Taxes/Utilities $500/mth $500/mth
Rental Income $7,000/mth $7,000/mth
Cashflow -$2,325/mth -$650/mth

Networking break!
See you in 20 mins!

FINANCING BLUEPRINT
BEING STRATEGIC WITH
YOUR FINANCING

PLAY IT LIKE A CHESS GAME
1 2 3 4 5 6 7 8
MONOLINE
SCOTIA
TD
CIBC
HOME TRUST
1 2 3 4 5 6 7 8 DOORS
CREDIT UNION
NATIONAL BANK

1-4 PROPERTIES
(SET UP)
Most lenders have a “Global
Limit” of 4-5 rentals
Features:
 Preferred pricing
 HELOC’s for rentals
 Split mortgages
Initial refinance of personal
residence
BLUEPRINT
STRATEGIC
FINANCING

5-10 PROPERTIES
(REBALANCE)
Reduced lender options
Full portfolio should have DCR of
1.10+
Reporting to personal T1 generals
Some big banks (branch
relationship)
Credit unions
“B” lenders
Consider a REFINANCE before
you buy the 5th property
BLUEPRINT
STRATEGIC
FINANCING

10+ PROPERTIES
(SCALE)
Turn your portfolio into a
business
Commercial blanket across
your portfolio
Up to 75% LTV
Up to 25 year amortizations
Commercial rates + fees
DCR (Debt Coverage Ratio)
ideally 1.25+
BLUEPRINT
STRATEGIC
FINANCING

WHAT’S HAPPENING WITH MORTGAGE RATES?
VARIABLE RATES
Bank of Canada increased their
overnight rate by 4.25% between
March 2022 to Jan 2023 from
0.25%.
PRIME rate now 6.70% (with
most lenders)
Average 5-year variable rate is
5.70-6.80% for personal
residence
Average 5-year variable is 6.45%-
7.000 for rentals
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
1-Jan-22
1-Feb-22
1-Mar-22
1-Apr-22
1-May-22
1-Jun-22
1-Jul-22
1-Aug-22
1-Sep-22
1-Oct-22
1-Nov-22
1-Dec-22
1-Jan-23
BOC Target Overnight Rate

WHAT’S HAPPENING WITH MORTGAGE RATES?
FIXED RATES
Average 1-2 year fixed 5.49-
6.39% for personal residence
Average 1-2 year fixed 5.74-
6.79% for rentals
Average 5 year fixed 4.49-5.94%
for personal residence
Average 5 year fixed 5.39-6.29%
for rentals

RATE TRENDS
VARIABLE OR FIXED?
INFLATION
5.2% for Feb 2023 (down from 6.30% in December)
BOC expects inflation at 3% by mid-2023 and 2% in
2024
FORECAST
Market is pricing possible 0.50% rate drop mid-2023
Most bank economists expect the overnight rate to
drop additional 1.00-1.50% by 2024
WHAT SHOULD YOU BE DOING?
Consider short-term fixed rates (1-3 years)
If buying with less than 20% down consider variable
where greater discounts are still available.
HELOC Financing
Extended amortizations up to 35 years

THANK YOU
QUESTIONS?
HUGO DOS REIS
Mortgage Broker & Founding Partner
Vine Group
hugo@vinegroup.ca
416 616.4451
TYLER LIPINSKI
Mortgage Agent
Vine Group
tyler@vinegroup.ca
647 868.1427

@volitionproperties
Take MASSIVE Action…

@volitionproperties
Key Takeaways
Small window of opportunity
○ Spring Market
■ Market is heating up, sub $1M duplex is gone, window is
closing fast…
○ Fall Market…
Mortgages
○ …Whatever Hugo said! 😂

@volitionproperties
How Volition Can Help. As Advisors.
FREE 30-min
Advisory session
with Matt
Come prepared with:
Capital available to invest
Mortgage qualification
Current real estate portfolio details
We will help you determine:
Where you are at
Where you want to go
Customized plan to get there

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Home Buyer & Home Sellers
are 50% of our business! We
can ensure that your home
makes good financial sense.
Pre-Analyzed Deals for Investors looking
for the BEST investment properties in
Toronto!
How Volition Can Help. As Agents.
FREE 30-min Realty
cell phone call with
Ming

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Your Next Step… Take MASSIVE ACTION
SCAN TO BOOK A FREE 30-MIN CONSULT WITH VOLITION!

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Next Month:
“Street Smart Tour: What to buy in 2023 edition”
Date: Saturday, April 29, 10 am
Location: TBD (Hot properties can be anywhere!)
RSVP: www.meetup.com/Volition
LARGEST REAL ESTATE MEETUP IN TORONTO WITH OVER 4000+ MEMBERS!

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End

Financing 201: Changes in the mortgage industry that affect Real Estate Investors

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