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Georges El Masri [00:00:01] Welcome to the Well Off podcast, where the goal is to motivate, inspire and share success principles. I’m your host Georges El Masri. On this episode, I interviewed Michaels and Senior, who is the lead mortgage agent, IBM Select, and he’s been working primarily with investors for about eight years now. He manages portfolio structuring and strategic sessions for investors. And on this episode, we talked about the recent rate announcement and the impact that he’s seeing on the market. 40 year amortization, will banks be allowing it in the near future? We talked about strategies to lower your monthly mortgage payments. If you’ve noticed that your cash flow is a little bit tight special mortgage programs. So net worth programs and then self-employment programs for certain individuals and who might be able to benefit from these. And then the benefits of working with TD and the recent changes with Scotiabank financing when it comes to hold. So I hope you guys will enjoy the episode. I just want to say that I’m grateful for your support and for you guys tuning in all the time to the one off podcast. If you do appreciate this, make sure to share this with a friend or family member and then leave us a five star review on the Apple Podcast platform. That would be greatly appreciated. If you want to connect with me to discuss investment options and strategies. I’m happy to do so. You can book a 15 minute call. I’m happy to help you guys out and share with you what I know. So just go to off dot CA and you can book a call there. There you go. Enjoy the episode. I’m here with Michael. It’s first time we meet. It turns out we have a lot, you know, a lot of the same people. Thank you for coming by today from Bolton.
Michael Zanzini [00:01:34] Thank you. It’s a privilege. Thank you for having me, Gerry.
Georges El Masri [00:01:36] Yeah. So I like to just start off by asking you about your childhood. So tell me a bit about where you grew up. Couple of things you remember.
Michael Zanzini [00:01:42] I was born in North York, lived there my early years. My parents bought a house here in Woodbridge, moved here when I was about seven years old. So did all my elementary all my high school years here in Woodbridge, grew up here, born and raised Italian community. Hence the last name, obviously, right? The stereotype. Yes. Full circle. Yep. Stereotype is real. All the Italians are here. Pretty much grew up here in Woodbridge. Yeah. Pretty great. Childhood sports come from a great family of immigrants from Italy. Instilled a lot of life good lessons in me, which stick with me today. Smart with my money investing. Yeah. Being honest.
Georges El Masri [00:02:21] Transparent off you.
Michael Zanzini [00:02:22] Mortgage, pay off your mortgage, be respectful and just live every day. Try to take the best of every single day. Right? Every day above ground is a good day.
Georges El Masri [00:02:30] Yeah. So I don’t know if you probably don’t know this, but I’m married to an Italian.
Michael Zanzini [00:02:34] Oh, fantastic. Good on.
Georges El Masri [00:02:35] You. Thanks. Now, now, every time like you meet an Italian, they always ask, where are you? Which part of Italy? So I’m going to ask you which part of it, please? Your family.
Michael Zanzini [00:02:43] Both my parents are from Rome. Small town Frosinone. Right. Central Italy.
Georges El Masri [00:02:48] Cool. All right. Seems like this is every Canadian Italian story. Well, anyone from Ontario. Start off in North York. Move to Woodbridge and move out from there. So, yeah, you got that typical story going. So let’s talk a little bit about how you got into mortgages. It’s I know Italians are generally a little more conservative, right? Like you have your job, you get paid, pay off your mortgage and that’s it. Like nobody seems to take massive risks in the Italian community. But tell me a bit about how you got into mortgages.
Michael Zanzini [00:03:21] So how do I really want to explain this? So like I said before, I come from very good parents who instilled those traits investing, being smart with your money and stuff like that. So my parents were investors, so in my early twenties. Little funny story here, obviously me, I’m a mortgage. If anyone knows I’m a mortgage agent with BMS select. So funny story is my parents were real estate investors getting their first property and I went with them to go meet the owner of my brokerage that I work for now to go and get preapproved for their first rental property and went in with them, sat down with them, got pre-approved by the owner of my brokerage and straight from there bought their first property was always interested in basically money right? Like how do you continue to grow purchase real estate? My parents got me involved in private lending at a very young age and flash forward a couple of years go by and still trying to figure out my life what I want to do, being a young guy. And I called up the owner of my brokerage and I said, Hey, do you remember me? My parents are clients of yours. They’re like, Yeah, I remember came into the office, it was like in the new year and he’s like, What do you want to do? When do you want to start? He’s like, I can tell that like you’re trying to make a change in your life. And I’ve literally been there ever since. Learning the ropes through mortgage underwriting, working with clients day in and day out, which I’m proud to say now is the lead mortgage agent at my brokerage IBM Select. So trying to summarize the story, obviously there’s a lot more details, but that’s kind of how I got really into investing, purchasing real estate myself. But it was because of the exposure, because of my parents with still to this day I’m so grateful for because where I’m at today is because. Of them.
Georges El Masri [00:05:00] Yeah. Awesome. You said they got you involved in private financing. Was that so? You were doing you were lending money at that age? At a young age.
Michael Zanzini [00:05:09] Young age, I’d say I was starting in my early twenties. My parents were involved in private lending. So I was working like part time jobs at that time, saving up. My parents got me involved, whether it was five grand, ten grand, 20 grand, just accumulating the pool of money, obviously, with my parents making a little bit more getting exposed to it and understanding it and then purchasing my first rental property at the age of 27 purchased another one a year after that. Got married at 29 recently. Just had a baby boy three and a half months old.
Georges El Masri [00:05:40] Oh, nice. Congrats.
Michael Zanzini [00:05:41] So right now, sitting at four rental properties at the moment are single family homes. One of them probably has the capabilities of a duplex conversion. That’s something that maybe is in the works, considering maybe dabbling now into a multi-unit, maybe a duplex or a triplex that’s on the horizon, just very time consuming, doing mortgages day in and day out, like least six, seven days a week plus now the new addition to the family. But that’s on the horizon right now.
Georges El Masri [00:06:06] How old are you, by the way?
Michael Zanzini [00:06:07] 33.
Georges El Masri [00:06:08] Okay. Yeah. So we’re pretty much the same age. I’m 32, so. Three and a half month old. Yeah, three. Now, that’s. It’s a big change. Any change? Big change.
Michael Zanzini [00:06:17] Beautiful change, though. It’s changed my life for the better. 100%. But yes, now I can honestly say usually when you talk to people that have kids like way to you have them, you’ll see now I know what it means. It’s beautiful, crazy, life altering, but I wouldn’t have it any other way.
Georges El Masri [00:06:31] Yeah. So you’re finding it okay to manage, you know, being at home, being a new dad and running the business and all that.
Michael Zanzini [00:06:37] Absolutely. I’m very fortunate. Obviously, my wife carries the bulk of the weight, obviously. But yeah, it’s awesome. Challenging, of course, because you always want to spend a little bit of time with him and see him as he grows up because they grow up so quick. But my focus right now is if I haven’t been motivated before, it’s even more motivated to continue to prosper and invest in growing the business, trying to do as many deals as I can in the mortgage space, continue to grow and make money because now I’ve got a little one that that I’ve got to worry about.
Georges El Masri [00:07:04] Yeah, yeah, sure. So I have a son as well. He he’s just over a year old. And when I when we first had him, people kept asking me like, do you feel more motivated? And I don’t know why. I never I didn’t feel like I was I became more motivated after my son was born for whatever reason; I feel like I was always motivated. But yeah, I do understand that you kind of have that extra push. Like, I want to make sure he’s taken care of. Right.
Michael Zanzini [00:07:27] I agree 100%. It’s exactly like I’m already a driven, motivated person prior to the child. It’s just it amplified it that little bit more now. It’s like, oh, right, yeah.
Georges El Masri [00:07:38] Yeah, yeah, for sure. So where are your rentals? Are they all kind of in the same area or do you have them all over?
Michael Zanzini [00:07:43] Two of them are in the Kitchener-Waterloo area and one is in Stoney Creek on the Hamilton Mountain and the other one is in the Thorold Welland area.
Georges El Masri [00:07:53] Okay.
Michael Zanzini [00:07:53] So two existing that we bought existing properties resell and then the two were new constructions.
Georges El Masri [00:07:59] Cool. That’s awesome. And then what’s your what’s your goal with your investments? Just out of curiosity, what are you trying to achieve?
Michael Zanzini [00:08:05] You’re so funny on the drive here, too, because I’m like, I guarantee he’s going to ask me about that, like strategies like going forward. And I was, I was actually thinking about it last night on the way here. So like I said, obviously my goal is to acquire more real estate, pay them down cash flow, continue to grow and build. But I was kind of thinking maybe a different strategy. Of course I want to acquire more real estate, but maybe the mentality is focusing on pay down, pay down the mortgage, get them paid off quicker, build that cash flow up. I’m actually going through a process right now, refinancing one of them to access the equity that just have that vehicle in place if an opportunity comes up, might be strongly searching in the new year in 2023. But yeah, that’s kind of my strategy right now, kind of focus on the pay down, build up that cash flow, build up that equity and kind of take it from there, see where things go. I know the market’s crazy right now. Interest rates have been on this upwards trajectory. It doesn’t seem like there’s no stopping. No stopping. But hey, at the end of the day, we’re seeing still great opportunities in the place right now, regardless of the interest rate. Some people have the saying like, you’re not marrying that interest rate, you’re locking in that mortgage in that purchase price. Right. The rates won’t always be like this forever. The numbers make sense. There is no emotional attachment to real estate.
Georges El Masri [00:09:19] So let’s talk about that a little bit, because right now it’s December 8th and there was an announcement yesterday. So 50 basis points, another increase. What kind of reception have you had? What are you seeing? Are people afraid now? Like more afraid or people just at this point saying whatever, it’s they’ve already increased it so much. Who cares? You know, like, what are you saying?
Michael Zanzini [00:09:39] It’s tough to answer that question because you see it from both sides. When you’re dealing with clients each and every day, you have the people that are panicking, freaking out. What the hell do I do? Their mortgage payments are increasing, or people that are wanting to get into the market are now even getting pushed out further just because of the rising rates. I don’t have the crystal ball, ladies and gentlemen, like nobody does. Right. You’re dealing with government and politics here. If I was a betting man, maybe another increase come the new year, maybe another two potentially. But at some point I feel like we’re either going to have to stay stagnant or start to retract as well.
Georges El Masri [00:10:12] So here’s the thing. Like when you say you don’t have a crystal ball or whatever, you always hear mortgage brokers kind of saying, well, I think this is going to happen. Is what is that based on? Is that like you guys have kind of information that the general public don’t have or what?
Michael Zanzini [00:10:26] We’re always in tune with the lenders. We’re always having Zoom calls or emails or staying in the know with these people, right? We’re dealing with these banks each and every day, lenders each and every day. What are you guys hearing? Where is the markets like? What are you guys saying in your meetings? Right. Following the economists, following just the big figures in the space. And it’s for me, I think. Yes, it’s it was necessary. The rate increases 100%. We were at those artificially low rates, which obviously caused this to where we’re at today. But at some point, we’re going to have to be hitting a wall because it’s damaging our economy, it’s damaging people. It’s making things a lot more difficult for people. Right. So at some point I feel like maybe in the new year 2023 could be mid could be end of 2023, we’ll start to maybe see rates start to come down. But as of right now, yes, don’t panic, ladies and gentlemen, it could be just a blip on the radar, you know what I mean? Necessary process that we’re going through right now. But I feel like things might change for the better in the future. Good thing, too, is property values are coming down, right? So it’s all about perspective on how you look at things, right?
Georges El Masri [00:11:32] Yeah. So things, things have changed quickly. So it’s kind of hard to kind of predict or understand the impacts that it’s had because you still have people that have been locked into their fixed mortgages, so they haven’t been impacted. But what do you what have you seen? What kind of impact so far have you seen on the market? Are people starting to get in trouble? Are you seeing people default on their payments or.
Michael Zanzini [00:11:53] We’re not necessarily seeing seen people default. You obviously have a lot of clients calling us each and every day. Like, for example, there are many banks that have static variable rate payments where their payment do not change. Right. But once you hit your trigger rates on those on those static variable rate mortgage payments, now you’re there’s no more principle being paid down. So it’s strictly all interest. You’re essentially renting your own house. And what are the banks doing? They’re either stretching out your amortization because now it’s all strictly interest only payments. They’re giving you the option to either lock into a fixed rate, increase your payment, or do a lump sum payment to get your numbers back in line to an amortization. So what a lot of clients are looking at right now is either which we help a lot of people do, is refinance that property, maybe put that amortization, amortization back to 30 years, maybe looking at a short term fixed rate option right now to have that piece of mind of no fluctuation, getting things back in line. That’s what a lot of clients are doing right now.
Georges El Masri [00:12:49] Okay. So if you’ve reached that trigger rate, are you forced to do something or can you just keep it like if you’re just paying interest only?
Michael Zanzini [00:12:55] So a bank like TD was coming out saying that they will actually allow you to potentially still maintain your interest only payment. But inevitably, at some point if you’re coming up to your renewal, you’re going to be forced to make a decision whether it’s lock into a fixed rate, increase your monthly payment, or do a lump sum payment to get your numbers back in line. But the longer you go in writing out that interest rate, I mean, that interest only payment, you’re not paying any more principal. So your amortization is out of whack. You’re not maintaining that amortization schedule to pay down your mortgage. That’s why we’re seeing a lot of clients dealing with right now. Sure.
Georges El Masri [00:13:28] Right. Yeah. I mean, I guess it makes sense in certain situations. If you’re an investor, you have a rental property and you just want to see what happens in the next year or two, you’re anticipating lower rates then maybe it makes sense to just keep it and not refi and then, you know, increase your payments dramatically and potentially impact your cash flow.
Michael Zanzini [00:13:46] Exactly. Or you’re seeing a lot of clients who are coming up for renewal and they’ve been all nice and cozy with low one, two, maybe 3% interest rates and then they’re getting hit with rates in the fives. Now you’re starting to see banks even with a six in front of it now. So there’s that shock value where the cash flow is completely been depleted and the numbers are just not making sense. Even more of a potential reason to now refinance it, stretch it back to a 30 year amortization, even at today’s higher rates, maybe it’s consolidate debt, keep some money in your pocket on a monthly basis and ride out the storm. Like we say whether it’s short term, one year or two year, kind of see where the dust settles and reevaluate.
Georges El Masri [00:14:23] Now, what about 40 year amortization? So what do we have on that?
Michael Zanzini [00:14:27] There’s talks there’s been talks of many things as of right now. There are some lenders that will consider a little bit of a longer stretched out amortization. Is it in the works? Potentially, nothing is coming to fruition just yet. But as of right now, predominantly the major lenders are still maxing out at a max 30 year amortization.
Georges El Masri [00:14:47] Yeah. So these are the lenders. What about credit unions? Be lenders.
Michael Zanzini [00:14:50] Yes, be lenders. Still 30 years. There are some credit unions that can consider it. We are also seeing if anyone is in the commercial space, there is the potential in the commercial side. Ways to do extended amortization. So yeah, who knows? Who knows what the government of Canada and these policies that might come into play to kind of solve kind of what’s happening because I like what you said before, I don’t think we’ve really seen the true the true impact of what’s happening just yet. It might take a little bit longer, especially with trying to combat this inflation. It’s not like you’re going to see results instantly. It’s going to take time. We might start to see where things play out maybe next year. But yeah, great, great point.
Georges El Masri [00:15:28] When we talk about 40 year AGMs, I know I’m kind of catching you like on the spot here. I could have probably given you a heads up before, but can you, can you think of any credit unions off the top of your head that might offer that?
Michael Zanzini [00:15:39] Off the top of my head, no. But obviously I can look into it for sure. You reach out to me and get you some details or any clients or anybody listening, of course.
Georges El Masri [00:15:47] Sounds good. A couple months ago, appraisals were big thing. Properties weren’t being appraised when people were purchasing them, waiting two three months to close. And then by that point, property values came down. Are you still seeing issues like that or have you guys resolved that problem?
Michael Zanzini [00:16:02] Yes, that was kind of a big issue. Had a good chunk earlier on in the year with the property values kind of going down. You were seeing that a lot. But as of right now, you’re starting to see the finance conditions come back into place on properties, inspection conditions. When the market was absolutely crazy, you were seeing a hell of a lot firmer offers, but now not as much. Hey, at the end of the day, if you’re doing your due diligence, working with a trusted real estate professional and your realtor or your coach, whomever it be, you’re not seen as much right now. The values are there. It’s just tougher because we’re seeing people get impacted the most is people that are wanting to refinance or people that have done burst strategy methods or conversions where maybe the comparables aren’t there anymore and the values aren’t there, what of what they’re hoping for. So that’s what we’re seeing a lot of hoping for, $1,000,000 valuation, but the comparables are eight, eight and 850. So what we’ve kind of tell clients is run your numbers. Does it make sense or does it actually make sense to hold out? And let’s see where things happen into the new year and you might get that appreciation and that value back as well, because as of right now, an appraisal is based on what based on comparables in the areas. So if you’re looking to access the most amount of equity at a property, but the comparables with recent sales aren’t there, you’re not going to get top dollar right now.
Georges El Masri [00:17:17] Another major thing that was happening before is that when the market was on fire, people were overleveraging, taking privates and then banking on the property being worth so much more once the renovations were complete and that kind of thing. What are you seeing like? Have you come across situations where people got privates, did the renos and they’re trying to refine exit out, but the values just aren’t there anymore.
Michael Zanzini [00:17:39] I’m seeing it each and every day, all the time, but that’s where you’ve got to be working with maybe a trusted mortgage professional to look at other options. Maybe it’s a Band-Aid fix where we may have to expose and get some equity out of your existing properties to bridge that gap of that shortfall. We’re starting to see a lot of private lenders not willing to renew clients just because of the values of what they were securing a private in 2021, in early 2022. Now you’re coming up for renewal and that property is not worth what it was when you originally got the loan. So you’re starting to see that more and more.
Georges El Masri [00:18:10] Yeah, well, I think last year private firsts at 60% loan to value were 70% loan to value were at like 5% absolute. Yeah. Which is a crazy amount. But now what are we looking at for privates, if you can just kind of share a little bit.
Michael Zanzini [00:18:25] At the end of the day, it’s all based on property, area and location loan to value private lenders very fixated on the property area, condition value and all of that. That’s how they’re pricing it. You can still maybe see private still in the nines, tens of, of course. But you have to think about it now that you’re starting to see the lenders move from the fives potentially now into the sixes. Now the blender interest rates are typically anywhere from 1 to 1 and a half percent higher than the lenders will. If the lenders are at that, the private lenders got to now price accordingly on top of that. Right.
Georges El Masri [00:18:58] So but the privates are generally interest only. So sometimes I guess a private 8%, the payment might be lower than a lender, correct.
Michael Zanzini [00:19:09] Interest only? Absolutely. The fees. You also have to remember when you’re dealing with the private lenders, on average, you’re looking at maybe 3 to 4% in fees based on the loan amount. So you have to factor that in into your calculations as well.
Georges El Masri [00:19:22] Yeah. So I guess there’s a broker fee and a lender fee, but from what I remember it used to be lower. Like to have the have the fees come up on privates.
Michael Zanzini [00:19:32] They have they have is all depends right. Like this is what I mean based on the client, based on the property and all of that, obviously they’re lending on risk. The better the loan to value, the more skin a client has in the game. That’s where you see the more attractive rates in the more attractive fees. But if you’re trying to leverage to, let’s say, 80, 75% loan to value, it’s more risk, especially in this market with values dropping. That’s where you see the private lenders pricing higher rates, higher fees.
Georges El Masri [00:19:59] I guess I guess it would be a little bit safer if you’re getting a second kind of on your primary residence versus a rental property, right?
Michael Zanzini [00:20:07] Yes, to a certain extent, I agree with you. But when you go into a second position, mortgage, maybe rates can tend to be even a little bit higher. And the fees, because now you’re in a second position, you’re in a riskier position for a private lender. But at the same time, not to sound counterproductive to what I’m saying is sometimes getting a second on a property that has such a good loan to value may have very minimal mortgage left on a property or be completely mortgage or have very little debt on there. It’s a very low risk second mortgage to a private lender and you can still get attractive rates.
Georges El Masri [00:20:38] Yeah. What would be some strategies that you would share now if you’re looking to lower your monthly payments or let’s say you just you have a rental property, your cash flow is a little bit tight on there. What would you recommend doing to address that issue?
Michael Zanzini [00:20:55] At the end of the day, it all comes down to the very basics of running your numbers. What’s coming in from an income standpoint, what are your personal expenses? What are the expenses on the property and running your numbers? Going back to what we talked about a few minutes ago, where is getting people over this hump of this little bit of a bumpy roller coaster ride we’re on right now? Very, very important that people run their numbers because by looking at a simple possible refinance on a property, on your rental property, moving things back, stretching out the amortization, getting rid of maybe some personal debt, car loans, lines of credit, credit card debt, shifting it onto your rental even at today’s higher rates can still be saving you monthly costs each and every month. That’s a huge, huge component for a lot of clients that people don’t realize is doing that can actually help getting rid of car loans, getting rid of lines of credit, leveraging it onto your rental, pushing it to a 30 year amortization because you’re lowering your monthly obligations. Right. So that’s number one. Number two, when you actually run your numbers stretching out that amortization, in most cases, their monthly payment tends to be a lot lower. If you’re factoring in what your current mortgage payment is, factoring in your personal debt that you have and your monthly obligations so it can actually work for you in favor. It’s all about running your numbers, whether it’s reaching out to me or your mortgage professional. It’s running those numbers and building out a game plan because everyone likes to say, Why would I leverage? Why would I do this? Why would I pay off debt? While you’re getting rid of your monthly costs leverage down to a rental. People tend to forget that your interest on an investment property also is a tax deduction at the end of the year. So shift that debt there and reevaluate. Let’s see where a year or two comes, see where rates are at and reevaluate.
Georges El Masri [00:22:32] In case anyone’s listening. And they don’t really understand what you mean by stretching out your amortization. I guess if you’ve owned a property for, say, ten, 15 years and you’ve gotten years left on your mortgage, what you can do is re amortize stretch that payment out over 30 years again so that your payment comes down. Even though the rate’s a little bit higher, it’ll probably be beneficial for you. But that process involves qualifying once again for that mortgage, right? Absolutely. Yeah. I guess another strategy would be to get a larger home equity line of credit. So splitting your mortgage instead of being like 100% mortgage, maybe going 50% mortgage 50%, he like home equity line of credit. So that you’re paying interest only on the home equity line of credit, which again can reduce your payment. And that’s an area that doesn’t work for everyone because again, you’re not paying down your principal when you do that as much. But it could be beneficial for some.
Michael Zanzini [00:23:23] Exactly. Absolutely can be beneficial. There’s always pros and cons, every scenario. But yes, you hit the nail right on the head by doing that method on the home equity line of credit component interest only payments if you wish. You obviously have the ability to pay down more, but there is no principal and interest payment where it’s gradually being paid down every week, every two weeks, every month. So it’s may not work for everybody, but it is an option. And that’s why reaching out, running your numbers, going through all of the options and see what fits best for you and your family on your property.
Georges El Masri [00:23:51] And now if you do have a hillock, from my understanding with most lenders, you can convert that into a mortgage without qualifying, right?
Michael Zanzini [00:23:58] Correct. At any time. So we use the term in our industry crystallizing it, meaning at any point you can convert your existing home equity line of credit balance into a mortgage.
Georges El Masri [00:24:08] Right. And what would be the benefits of doing that? I guess just to include principal paydown as part of the mortgage? Or would there be.
Michael Zanzini [00:24:14] As we see as well like it, every client is different. Every situation is different. That’s what people have to remember is that there isn’t one all end all be all option for every single person in this country. It has to make sense. But yes, converting that home equity line of credit to a mortgage can be beneficial. Principal and interest pay down. Maybe you’re securing a lower rate compared to where he lock rates are now at prime plus typically most lenders are offering prime plus a half. Some banks are prime plus one prime plus a quarter. You’re getting up there and an interest rate. But in the same breath, keeping that home equity line of credit balance can still be a lower monthly cost with an interest only payment to bridge that gap.
Georges El Masri [00:24:53] Sure. So I’m just going to throw out a scenario here at you. Let’s do a case study quickly. Let’s say you got a mortgage last year when the rates were really low and it’s a static variable and you got it at prime -1%, let’s say. And then you also have a high lock as part of this scenario. Let’s say you’ve got a I don’t know, just for the sake of simplicity, you have a $500,000 mortgage, you’ve got a $250,000 lock. If you wanted to convert that he lock now into a mortgage. What would happen? Would it would it blend into the existing mortgage because you’ve got a prime -1%? Or what would happen in that separate.
Michael Zanzini [00:25:30] Question, you would actually be converting that home equity line of credit into a second mortgage, not second mortgage like a private lender type second mortgage, but a second component mortgage. Based on today’s rates, it would be beautiful if we’d be able to leverage it and kind of amalgamate it with the existing rate. But it would be based off today’s rates, not what you originally secured your first mortgage, Porsche.
Georges El Masri [00:25:51] Got it. So your first mortgage would stay exactly as it is your paying prime -1% on that. But like you said, it’s a second mortgage that the healer component would turn into a second mortgage and you would pay whatever the rate is today. Correct. On what, five year fixed I guess, or a variable.
Michael Zanzini [00:26:07] I could look into any option of what you see whether it’s one year or two year three or four year, five year fixed variable in my opinion. I know you haven’t asked the question, but I do kind of like for most clients right now not to be thinking long term strategy of securing and locking into rates especially were hitting or at the peak of their interests. Interest rates have been for many, many years. I kind of like the short term Band-Aid strategy of maybe looking at a one year or a two year option. Why? Because if we do believe things might start to change in 2023, even 2024, you don’t want to be committed to a high rate locked in for so long. You want to be in something short term Band-Aid fix. Why? Because if things do change in our favor, we want to have the ability to pounce. If rates do come lower and we don’t want to be locked in for a long duration.
Georges El Masri [00:26:52] It makes sense. If I go back to our case study once again, let’s say you have some equity in that property. Let’s say it’s worth a million bucks now. And is it would it be possible to top up that he lock before converting it into a mortgage? Sheriff, just to maintain that first, because you have prime minus one. So you might as well keep that chair.
Michael Zanzini [00:27:11] Of course, if hey, at the end of the day, it’s all about qualification if your numbers work and you can qualify. So in Canada, based on numbers, based on your income in your debt service ratios is up to 80% of the appraised value, 80% of the value of the home. If your numbers work, of course you can look to restructure things. Maybe there’s added equity that you qualify for, have an increased line of credit, convert things to a mortgage. Sometimes it might make sense to amalgamate everything into one clean mortgage, set up and have another line of credit. It’s just all about numbers and structure.
Georges El Masri [00:27:40] Yeah, maybe if we dove into some of the lenders, are there any like maybe unique products out there with certain lenders maybe that cater to self-employed people or just anything that you’ve come across recently? That’s that sounds interesting to you.
Michael Zanzini [00:27:56] Yeah, of course, most banks I shouldn’t say most banks, there’s some banks that have great like net worth programs where maybe we don’t have the greatest of provable income. There’s net worth programs. If we are high asset net worth clients, there’s programs going based off like business financials and overlooking over a two or three year history of the business that banks offer be lenders are also great options for clients as well. Yes, they do come with a little bit of a higher interest rate. Yes, they typically charge small one time upfront fees. But this is could be night and day of a client qualifying for hardly anything with any lender bank. Because we have to remember when you qualify with any lender, it’s black and white. When you qualify with a B lender, they use a more realistic approach. They use more 6 to 12 month bank statements. They use a more stated gross income approach to help you qualify. And this can be the difference of you qualifying for a $200,000 mortgage versus with a blender qualifying for a seven $800,000 mortgage. So there’s different programs out there. Every client is different, and that’s what it comes down to. Working with a trusted professional, because especially working with a mortgage broker, you tend to have more access to multiple channels, not to knock any banks. We work with the banks every day, but when a client specifically goes in, walks into a branch and deals with a bank, you can only deal with their underwriting, their products, their interest rates when you need maybe a vast majority of options to get you the best options. And that’s what personally, myself, my company we try to strive for is we don’t sell a client on anything. We’re here to provide options, build a game plan for you, and the decision is yours. Which avenue you want to go?
Georges El Masri [00:29:33] Got it. I’m going to put you on the spot again. But you mentioned a net worth program. Can you name maybe a lender that has that that program available?
Michael Zanzini [00:29:42] Your bank has one. We work with Scotiabank a lot. RBC has one, I believe I believe TD, but predominantly we work a ton with Scotia on their net worth asset program. They have a really, really good one. We work with a lot of clients on that.
Georges El Masri [00:29:59] Well, I know there was a point in time where like some of the brokers our I was talking to, they kind of stayed away from TD because the they became tougher to deal with or whatever. But I think lately they’ve changed their policies. They become a little more investor friendly. Is that right?
Michael Zanzini [00:30:13] 100%. You hit the nail on the head with that one. So TD Love. TD We do a ton of business with TD Great bank, great rates. They’re awesome. But yes, they, they tend to have the stigma of being a hell of a lot stricter and more stringent compared to other lenders. But yes, they’ve kind of I don’t want to use the term loosened up, but yes, they’ve become a little bit more investor friendly, which is super, super advantageous for clients and investors to have another path and an avenue. Scotiabank is a very investor friendly bank that we work a ton with because you also have to remember when you’re as an investor, it’s all about structure and trying to put yourself in the best position to continue to grow and build your portfolio. Don’t get me wrong, interest rate is super vital and super important. But as an investor, if you have dreams, goals and aspirations of growing and building your portfolio, there is kind of a structure of the order of the banks that you want to try to fit in. Why certain banks are going to cap you at certain amount of properties before they just cut you off. So it’s all about navigating through the bank channels to maximize your portfolio, but to touch on your point. TD Why? TD Is a little bit stricter and more stringent is one. Predominant reason is a lot of clients do have home equity lines of credits. A lot of clients do have maybe multiple pieces of real estate. They’re one of the banks that actually uses the key lock limit against you. Even if you’re not carrying a balance, a home equity line of credit, whether you have a $500,000 lock on your home. A bank like TD will use that full limit against you, where maybe a bank like Scotiabank only cares about the balance. Don’t get me wrong. TD can be very favorable with clients. So can Scotia and so can other many lenders. But it’s all about trying to fit the box to see what makes the most sense.
Georges El Masri [00:31:50] Got it. So in an if you have like the ideal client for TD, what would their kind of finances look like? Just out of curiosity? Would they? Would they have like very few rental properties and high income or would it be I mean, why would somebody go to TD? Well.
Michael Zanzini [00:32:06] I’m going to go a little bit technical in my world right now. It might go over some people’s heads that are listening. But like, for example, on your very first investment property pre-approval when you’re qualifying TD is not always the greatest lender because they use offset they use 50% added to gross of your rental income where another bank can use potentially 50% of the rental income or 80% offset of the income where they’re using a 50% added to. GROSS So it’s not really favorable on your first rental, but where TD can be super advantageous is moving to now property too and so on. In a perfect world, guys, it’s tougher to qualify for every single human being in Canada right now just because the higher the interest rate, the higher the stress test. As if we’re now hitting rates at 6%, let’s just say the bank’s qualifying you at 8% stress test. So everyone’s borrowing capacity has been diminished over the last.
Georges El Masri [00:32:55] Have there have there been any talks about removing the stress test?
Michael Zanzini [00:32:58] Potentially, yes. That so in your asking about the stretched out amortization. There was even talks where they were saying for an investor, they actually want to potentially get rid of using home equity lines of credits towards down payment in all of this. But the other one that they were talking about was that. Exactly.
Georges El Masri [00:33:12] Okay. Interesting. Just so many different changes. Do you have an idea of which bank might be favorable towards self-employed people or might have a good program for people that are self-employed?
Michael Zanzini [00:33:23] Scotiabank’s a good bank with those programs. It’s possible. I’m not saying it’s a slam dunk guarantee. Obviously, you always have to be lenders in your back pocket and you also have to remember to with the be lenders. The beautiful thing about B lenders is they use a more realistic approach to qualify you when you are self-employed using like more gross income approach, you have to remember it’s you’re not there to stay with a B lender, like a home trust, like an equitable bank. People have probably heard of them. They’re some of the biggest lenders in the space. If we can get you in a position to qualify, maybe it’s securing that property, staying with them for a year or two, and then having us qualify with another lender or vice versa, right? Maybe it’s cosigners. Maybe it’s looking at options to get our numbers back in line to qualify with an AA lender. It’s all about numbers because my conversation can go down two different paths. If we’re looking at a primary residence property that we are paying for, very rate driven, very focused of that structure. It’s something that’s costing you and your money to live in. But when we’re talking investment, we have to look at the bigger picture in the strategy. There is no emotional attachment when you’re buying an investment real estate. It’s just all about numbers and making sense. It’s got to make sense for you.
Georges El Masri [00:34:25] Yeah. Okay, cool. I appreciate you sharing all that.
Michael Zanzini [00:34:28] Great questions.
Georges El Masri [00:34:29] Money on the spot. I told you last thing is buying and hold costs. So let’s talk a little bit. I know in the past that brokers weren’t able to qualify for properties under hold calls through Scotiabank, but that’s recently changed. Yes. Have there are do you have access to other lenders or whatnot that are able to finance?
Michael Zanzini [00:34:49] Yes. So Scotiabank recently, I would say within probably the last year, year and a bit, they have actually change their ways through the mortgage. Broker channel. They are allowing purchases under a corporation, which has actually been absolutely fantastic. You have to remember to inside the mortgage broker channel, we have access to many, many lenders. But out of the major lenders you’re specific is Scotia and TD. Every single mortgage broker there access in the mortgage broker channel is Scotia and TD. This doesn’t mean that we don’t have relationships and contacts and people that we can point you to at other lenders and all of that. But to go back to your question, yes, that has been a huge life changing thing in the lender space for the broker channel with the Corp. Now, one thing I always like to set the precedent on any client phone call, any zoom meeting, any meeting that I’m having with a client is when you are qualifying for a mortgage under a corporation. It makes no difference to me that your mortgage broker or to the mortgage agent, if you’re buying under a corporate personally, the qualification is still identical. It’s still you personally guaranteeing the mortgage. The real only difference being under a corp for personally is pretty much most lenders 95% of all lenders. The rate tends to be maybe a touch higher when you buy under a corporation versus person. That shouldn’t be the make or break reason why you don’t buy under a corp. Always got to speak with your lawyer, speak with your account, and speak from that standpoint of the pros and cons, and do your due diligence on deciding by an under a corp or not. And the other big thing is not having access to a home equity line of credit. If the property is under a corporation, that could be a make or break factor for a lot of clients.
Georges El Masri [00:36:19] You’re talking about with Scotiabank, though.
Michael Zanzini [00:36:20] Correct?
Georges El Masri [00:36:21] Yeah. Okay. Um, yeah, that’s interesting because I do have some properties under Corp’s, but they’re not with Scotia and I do have a lock on them. So I guess it depends.
Michael Zanzini [00:36:30] On which lenders are they with.
Georges El Masri [00:36:32] RBC, obviously.
Michael Zanzini [00:36:33] There you go. I was just about to say that’s why I said 95% of the major lenders won’t allow you to have it. RBC is one of them that will consider having a home equity line of credit under a corporation.
Georges El Masri [00:36:40] Okay, cool. I wasn’t even aware of that for Scotiabank. Okay. Good to know. Before we move on, any final words, anything you want to share?
Michael Zanzini [00:36:51] No, man, I would just thank you for having me here today. I told you I was checking out some of your contents. Over the last couple of days. You’ve had some pretty common people that we know mutually together. But yeah, if anyone needs anything, has any questions, please feel free to reach out to me or my team can reach out to our office. You can call us, you can reach out, find us on Instagram at Beam, Dot, Select, or you can reach out to me at Michael’s NZ any mtg call our office 9055698326. Happy to help if anyone has any questions anything mortgage related residential commercial. Private lending. Refinance purchase. We’re here to help.
Georges El Masri [00:37:24] Sounds good. Thank you so much for coming by. Appreciate you doing this. Thank you, buddy. Yeah, we’ll be in touch.
Michael Zanzini [00:37:29] That was awesome, man.
Georges El Masri [00:37:31] Thanks for listening to this episode. Your support is truly appreciated and if you can share this with a friend or family member, that might benefit from the information. Remember, our goal is to motivate and inspire others to take action and to build wealth and to become well-off. Enjoy the rest of your day.