The Best Mortgage Advice for Real Estate Investors in 2019

Andrew la Fleur: If you’re a real estate investor looking for the best advice for getting a mortgage in 2019, this episode is for you. Stay tuned.

Speaker 2: Welcome to the True Condos Podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.

Andrew la Fleur: Hi, welcome back to the show. Thanks again for listening in. Once again, Andrew la Fleur here. If you aren’t already, make sure you are receiving my weekly email updates for all things condo investing in Toronto. Just go to truecondos.com and put your name and email anywhere on the site to sign up. And if you found this podcast useful, if you’ve been listening for a while or if this is your first episode and after you listen to this, you found it useful, go ahead and share this with somebody that you know, somebody else who could benefit from the content that I’m putting out here. I’d really appreciate that.

Andrew la Fleur: On today’s episode Mortgage Jake is back. Jake Abramowicz, excuse me, is back on the show. He’s one of the top mortgage brokers in Canada, very experienced, knowledgeable dude, and just a great guy to share and hear from his insights on what’s happening in the mortgage marketplace right now. The main advice that I always give my clients condo investors is the mortgage marketplace and the rules around mortgages and which banks are good, which banks are not, what you should do, what you shouldn’t do, strategies.

Andrew la Fleur: The main advice on all of that stuff that I give people always is it’s changing all the time. It’s not a static stagnant world, the world of mortgages and especially the world of investment property mortgages. So you really have to be up on things, you have to have many great contacts in your Rolodex to speak to and talk with, and certainly Mortgage Jake is one of those guys in my book. So always great to bring him onto the show and hear what he has to say about what’s happening in the market right now.

Andrew la Fleur: And specifically this podcast is going to be useful to you if you are an investor with multiple properties already and you’re looking to add more this year, in 2019. Again, it’s not like it was three, four, five years ago. The rules, stress test, every … Interest rates, of course, amortizations, banks versus non-banks, brokers versus in-house banks. Everything’s different, everything’s changing. And so you’ve got to keep on top of these things and you’ve got to have a great mortgage broker in your corner, at least one, probably more than one, but definitely at least one in your corner as an investor, as somebody who’s looking to add multiple properties.

Andrew la Fleur: And also another messages is don’t get discouraged if you talk to one lender, if you talk to one broker and they tell you, “No.” Don’t get discouraged. That is a normal common happenstance in the current marketplace, even if you are a AAA, amazing, rock-solid, high net worth individual or client, that is a normal thing to hear from a lender right now. So again, importance of having multiple great contacts and people working in your corner. And Jake talks about that on today’s episode as well, just his advice and tips for people who are looking to get beyond especially sort of four or five properties, which is traditionally where most banks will put the brakes on you and say, “No more.”

Andrew la Fleur: But Jake obviously knows that that is not the end of the story and there’s many investors who 8, 10, 12, 15 properties. It’s just a matter of how do you get there today? How do you build that up today? It’s different than what it was maybe a few years ago, but it’s still very much possible, it’s still very much doable. You can still build an amazing portfolio with many properties and nothing to be afraid of and nothing to worry about, but you just got to have, again, the right people in your corner. So without further delay here it is, my interview with Mortgage Jake. I hope you enjoy it.

Andrew la Fleur: Let’s do it. Welcome back to the show Jake. Thanks for being on again.

Mortgage Jake: Thank you Andrew for having me. I really, really appreciate it. Love talking to you all the time on social media, through emails and overall just nice to chat and nice to kind of talk to your listeners who I’ve had the pleasure of meeting a lot of them, mostly by phone, by email and quite frankly, they’re such good, cool, savvy investor types that I really appreciate the opportunity to kind of help them out at best I can.

Andrew la Fleur: Great. So what are you seeing, I’m just curious what your thoughts are in general on the market. We’ve come off a couple of crazy years, 2017, obviously record smashing year and then 2018, a different market. What are you seeing? What are you sort of predicting? How do you see this year playing out, 2019, from your perspective?

Mortgage Jake: Yeah. I’m a mortgage broker who finances residential purchases for investors and end users. Couple of things I’m noticing, number one, the flipper community a.k.a., the person who’s looking at buying, turning a profit in about 12 to 18 months is finding a very difficult these days to find the property to renovate and turn over because the price of entry seems to be so high and there is such little margin and uncertainty with what is going to happen in the next 12 to 18 months in terms of the price direction of that kind of home.

Mortgage Jake: Secondly, there’s a lot of value for investors and buyers outside the 416 core when you’re talking or at least what I’m seeing when you’re talking from a detached, semi-detached townhouse type of investment. And thirdly, we talked about this two years ago, we talked about it last year, the condo market is still the lowest hanging fruit for first-time buyers and for investors. So it’s always the most competitive market that I’m seeing, just because it’s the “easiest market to get into”, and we have two or three streams of buyers getting into that market.

Mortgage Jake: Like I said, we have the first time buyer, we have the investor and we have people now that are buying secondary homes for their children or secondary homes for themselves. They have a 905 home, they’re looking at having a downtown condo. So the most competition is still in the condo space.

Mortgage Jake: The downtown market in terms of East to West, Bloor West, the Leslieville, up along the Yonge subway line from a detached, semi-detached perspective is still very strong and I just see as you kind of get further out things get a little bit looser and a little bit weaker, but I think 2019 has started up great, we have seen a lot of rate decreases, which is going against what we thought was going to happen. Early as October and November I was trending the bond market and seeing things just go lower and lower and I was advising everybody who was buying at the end of last year to go variable because undoubtedly rates would have had to follow and they absolutely have.

Mortgage Jake: So we’re down about 30 to 50 basis points, half a percent almost from the highs of the end of 2018, which is a very significant decrease in rates, and it’s brought a lot of people back to the table where people have a lot more confidence now. We’re also hearing a lot of chatter about stress test rules changes.Wwe’ve talked about this already, the elections are funny thing, all parties are going to come to the table and say, “We want to make it easier for buyers, first time buyers, investors, et cetera.”

Mortgage Jake: So we don’t know what the rule changes might be, but certainly there’s a lot less pressure on them being more difficult and a lot of pressure on them easing up a little bit. So that will potentially bring a whole new stream of buyers out to the market if some changes happen on that end as well, which would increase affordability, increase qualifying and make it truly easier to qualify on. So 2019, unlike last year, is literally the opposite. It started off with way more confidence, much lower rates, no more increases on Bank of Canada expected this year. Maybe one potentially, although I doubt it. So, how can it be a bad year, except for prices. Prices are just very high and some people just simply can’t afford to get in.

Andrew la Fleur: You mentioned the stress test. Now we’re one year into, more than a year into the stress test now. You think it’s time for the government to get rid of it? What’s your personal opinion on the stress test and has it served its purpose? Is it time for it to go? What do you think about the stress test?

Mortgage Jake: I’ve been doing some chatter and discussions with clients who are renewing their mortgages, who bought five, seven, ten years ago because a lot of these people, obviously we work with second, third go around. And just to be clear, the stress test has been around for a very long time in one format or another. Clients have always had to qualify at plus 2% if going variable. Now, what happened two years ago and last year, or I guess three and two years ago, the stress test came in first for the crop of 5 to 19% down borrowers and then last year January 1st, everybody had to qualify under the stress test.

Mortgage Jake: What’s funny is I agree with it partially. I understand why you want to make sure someone can afford higher rates. I get it, but this arbitrary plus 2% rule flies in the face of common sense thinking when rates are going down. We’ve seen 1.5 … We’ve seen, sorry, 5 increases in prime rate in the last 15 months. We’ve seen rates go up 1.25%. Now we’re seeing the five year fixed money come down. It’s still up around a % from where it was last year, but it’s certainly not close to the 5.34% that we have to use to qualify.

Mortgage Jake: So I would like to see the stress test modified. I would like to see 30-year amortization. And if you want to define first-time buyers, sure, let’s make it for them maybe or repeat buyers. No matter what, I would like to see 30-year am because of where prices are, and I’d like to see a plus 1% rule and a plus 1% on your contract. So if you’re borrowing at 3.39, can you afford it at 4.39, because realistically I don’t think rates can go up much higher than what we’ve already seen.

Mortgage Jake: So if rates go up a quarter or half a percent, great, you’re still showing you can qualify at plus 1%, not plus 2%. So those are the two changes that I hope the government will make soon although the high ratio borrowers, the 5 to 19% down borrowers, they’re probably in line to have these changes made faster than the conventional borrowers, who are 20% down or more because us, we poured water on the suggestion that they will roll the stress tests back.

Mortgage Jake: They said, and I’m going to quote directly from Carolyn Rogers, who is the superintendent. She said, “We are not making any changes. This is what’s not happening.” So the two crops of buyers will have different rules and that’s just probably what we’ll see this year.

Andrew la Fleur: You mentioned amortization. Can you remind everybody, because this is a question I get a lot and a lot of investors are often misinformed about what’s possible with regard to amortization period. So could you give us like a 60 second crash course on what amortizations are available to end-user buyers and to investor buyers today.

Mortgage Jake: Absolutely. So 5 to 10% down payment, maximum amortization is 25 years. You cannot be an investor at 5 to 19%. You have to have 20% down. So at 20% down or more, you don’t pay the mortgage insurance premium, the same HC premium is gone. You can amortize up to 30 years with the institutional lenders, BMO, Royal, TD, Scotia, everybody. You can buy a condo, purchase as an investment with as little as 20% down.

Mortgage Jake: I know there is some confusion with how much I need for my investment, 25 or 30. If you’re a well-qualified investor, 20% down is to the minimum and 30-year amortization is the max. Now, there are some alternative lenders, only a couple, that offer 35-year amortization, but the offset is the rates are much higher. They’re usually 1.5% more. So it doesn’t make sense to take that extra five years to pay the extra fees going with those lenders. 30-year should be your default calculation ratio in doing the math in terms of amortization.

Andrew la Fleur: Nice. Thanks for clearing that up. Some chatter, a lot of this talk in the stress test and everything with a past year is the discourse and the conversation is around there’s too much debt in Canada, we’re a ticking time bomb, it’s all going to crash down, the mortgage debt’s all-time high and things like that, household debt. We see these statistics flying around. And one of the components of that is HELOCs and home equity lines of credits, people refinancing their homes they bought many years ago, taking out equity. Just curious what your take is on that side of the market in Canada in general. Do you have any major concerns about household debt and specifically HELOCs and people refinancing? Is that something you’re worried about?

Mortgage Jake: So this is a two-part answer. First of all, the media does a great job of scaring us with respect of debt in general. What’s really interesting and extremely aggravating for someone like me, who has seen real estate, and you, we’ve both seen real estate create a tremendous amount of the opposite side of the ledger, which is wealth. So when you are hearing that household debt is going up and it’s on the first page of the report on business, which it is almost on a weekly basis, how often have we heard about household net worth increase?

Mortgage Jake: The last time I saw that article was literally a few months ago in the Globe and Mail third or fifth page and a little tiny article. And that is really aggravating to me because real estate has been one of the greatest wealth creation tools we have seen and implemented for our clients and it’s never discussed in a positive light. Every time I see a tweet about HELOCs going out of control, about investors, how much they have spent on their mortgages and how much they’re short a month for example, you never hear about how much they’ve created in their capital appreciation.

Mortgage Jake: So I am somewhat slightly concerned if rates were to continue to increase like the Bank of Canada kept saying we’re going to get to a neutral rate, which is around 2.5 to 3%, which is another 1 to 1.5% from where we are today, but there’s really no impetus for them to continue increasing rates at such a rapid pace. I’m not seeing any decrease in credit scoring on averages because we talk to our lenders all the time and they tell us, “This is our portfolio. Our average credit score is X.”

Mortgage Jake: And when credit scores remain as strong as they are, 700 plus, with even the alternative lenders, who are advertised as going after the subprime type of borrower. Well, those are not subprime, they’re prime in terms of a credit score. I’m not as concerned with things from a household that perspective.

Mortgage Jake: Now, the HELOC argument certainly has been made and it’s the lowest hanging fruit for the regulators to make further changes if they wanted to by limiting access to home equity lines of credit even further than they have already. That being said, a great majority, over 66% of home equity lines of credit right now, are not being utilized at all. So although there is an available limit that you can use and tap into, the majority of people who have a HELOC don’t even touch.

Mortgage Jake: So I’m not that concerned about it either. They already have limited home equity lines the maximum 65% of a house value in terms of a refinance. They allow you interest-only payments, but you may or may not know, some lenders on the backend have made their own tightening policy where with home equity lines of credit, if you’re not using it, they assume you will use it. So they’re underwriting you with the much more stricter guidelines.

Mortgage Jake: And those are nice changes to see because the banks are acting in front of the regulator and they’re saying, “Hey guys, we’ll make our own changes so that you guys can keep your hands up this market entirely.” So if you’re an investor and you’re thinking, “Hey, I’m sitting on a pile equity here.” You should consider getting a home equity line of credit sooner than later because if the changes do happen, that option will be gone. If you’re an investor and you deal with one bank and they say “No”, there’s about 10 to 12 lenders that will give you a home equity line of credit.

Mortgage Jake: So don’t feel like, “Hey, my bank said no there for others will say no too.” But I’m not concerned about household debt because slowly the government’s been tinkering with the rules and slowly making changes and yet we’re not seeing any changes in the price structure of properties and the GTA to a great degree. So overall, it doesn’t keep me up at night as much as the government overshooting the mark and making more stress tests.

Andrew la Fleur: Right, right. No, that’s a great summary of the situation. And like you said, if you have equity in properties with the sort of tightening environment that we’re in right now and the debt aversion from the policymakers that the world that we live in. It’s a good time, like you said, if you have equity in properties, whether you have a plan to use it or not, it’s a great time to set up a line of credit and have that tool in your toolbox in case you want to use it as opposed to they implement some new rule tomorrow and boom, you can’t access that equity for some reason the way, they structure it.

Mortgage Jake: Absolutely. And as you see everyday opportunity comes at you fast. You need to be ready to-

Andrew la Fleur: Yeah, that’s right.

Mortgage Jake: … And you need to have liquid capital. And it’s really interesting that when I deal with a lot of buyers who are selling and buying, a great majority of people don’t have 30 to 50,000 available to make a deposit on offer. Well, think about an investor. You’re looking in the pre-con market, you want to make an investment in a property, you find them an amazing idea, opportunity and they need to have 10, 20, 30,000. Well, it takes three to five days to set up a HELOC. By that point, that opportunity may be gone. Why not have it at your ready? And like you said, a tool in the toolbox where you can say, “Yep, I got it. Here’s the check. Done.” You’ve secured the unit.

Andrew la Fleur: Yeah. Yeah, exactly. Great advice for 2019 for sure. Jake, you’re well known for some of your awesome rants on social media about various issues, whether it be Facebook, Twitter, I love following you and just hearing you rail against everything that’s wrong in our industry and in the mortgage world. What are you fired up about this week, I’m curious. Is there something that you’ve seen lately that you say, “You know what, this has got to change.” Or, “I’m sick of this happening.” Or, “I wish people would stop believing this when it’s not true.” Or, “I wish government would wake up on this policy or this thing.” What’s got you fired up this week?

Mortgage Jake: I’m going to tell you a few things. One, may sound biased, but it isn’t. Two clients came to me this week, both of them were pre-approved for purchases from a bank. Both of them were told, “You’re totally fine. Your credit’s good. Income’s good. Blah, blah, blah.” Both of them went firm, and now they are both stuck because in one case the bank said, “I can use tip income to qualify you,” where you can’t unless it’s in your income tax returns. And the second said, “We forgot to include property taxes in your pre-approval. Now you don’t qualify.”

Mortgage Jake: And that really bothers me that the banks are doing a great job marketing the idea of pre-approval done in 60 seconds, for example, or something along those lines where this is such a major investment, such a major life choice, you cannot only bank on, no pun intended or pun intended, the advice of someone who doesn’t do this all the time. So speak to a broker.

Mortgage Jake: The second thing that bothers me and it’s gonna bother me until we hear about the election is, quite frankly a lot of the empty promises. When a lot of the leaders of the three parties are all going to come out and say, especially the Liberals and this is not a pro or anti-Liberal rant. This is in general politics rent. It’s all about getting your vote. When you hear about the promises they will make, look further or speak to professionals like me and Andrew and see is it even possible that the government can do this.

Mortgage Jake: For example, if [Auspey 00:21:33] is the regulator that regulates conventional mortgages and the parties all say, “We want to make 30, 35 or 40-year amortization available.” Hypothetically. Well, [Auspey 00:21:44] is going to say, “It’s not possible. So don’t even try it.” It bothers me that for three and a half years we barely hear anything positive about home buyers because stress test, stress because we’re going to make it harder-

Andrew la Fleur: Tightening, restricting, stop buying. You consumers are out of control. Stop behaving like that. Stop wanting to live in a house.

Mortgage Jake: Got to make it easier for you guys because you’ve been really hammered by the decisions that we’ve made upon you. The worst part is the other parties are saying, “Well, if we were in power …” Well, no when you were in power, you also made some tinkering. You also opened up the credit availability in 2008 and gave 40-year amortization and zero down payments, which I did those deals left, right and center and those people are all sitting on hundreds and hundreds of thousands of equity positions, but they made it so easy that this current government had to roll it back a little and then they have overshot the mark.

Mortgage Jake: So from a personal perspective, get a second opinion on your pre-approval always, it’ll cost you 15 minutes of your time. From the professional industry-wide perspective, look deeper than just the headlines of what the government wants to do and let’s see if they can do it. So I’m going to be grading each government’s policy promises and I’m going to say possible or total lies. Because right now we haven’t really heard many of them, but it’s just really bugs during an election year all of a sudden they care about the buyer. Where like you said, they were like, “You guys are out of control.” And now they’re saying, “Wait a sec, the market’s a little different.”

Andrew la Fleur: Bad dog. Bad dog. Now it’s like, “Oh, you poor puppy, you need to eat, come here. Let me give you some treats.”

Mortgage Jake: That’s it. The third thing is … And you operate not just in Toronto. You operate all over Ontario. No, there are many other markets that have been more greatly affected by the stress test than just Toronto. We live in a bit of a bubble here, not housing market bubble, but we live in a, hey, Toronto’s number one, center of the universe, which it is. It’s the best city ever. But Vancouver has been affected, other cities in the Prairies, Maritimes, et cetera.

Mortgage Jake: So the government may make some changes hopefully where they realize Toronto is a different animal. Let’s make the CMHC limits 1.5 million, not 1 million. Vancouver, it’s the same thing. Let’s help the other municipalities like the Ottawa’s, [inaudible 00:23:56], Hamilton, where there are some good investment opportunities for investors, and hopefully they will kind of come up with some sort of rule changes along those lines, maybe, or maybe they’ll just keep sitting on their hands and saying, “Canada is 6,000 kilometer nation and yet we have one housing policy for everybody.” That bothers me totally.

Andrew la Fleur: Right. Same housing policy for Toronto, average price a million and Moose Jaw, average price 200,000 or whatever.

Mortgage Jake: Right. It’s very strange. But nonetheless, I mean, those are the two or three things that bug me and I go on social media to rant because I don’t see these things covered oftentimes, and quite frankly I just think a lot of what people like … The anti-housing sentiment on there is so strong where I just, I can’t believe how much negativity is on there.

Andrew la Fleur: Absolutely. It’s great to have voices like yours out there spreading the truth. I wanted you to speak directly to seasoned investors, people who have four or five or more properties, people who are building portfolios, who keep adding and want to keep adding properties. What would be your main advice, tips, recommendations for investors like that, who are looking to add multiple properties beyond four or five properties in 2019? Who are you seeing maybe in terms of the best banks to work with, the best lenders to work with, maybe the worst ones or the ones to avoid? What would be some thoughts on speaking to that person?

Mortgage Jake: Sure. So the first thing I want to say about people like that are is I met an investor client who owns six properties and she brought me a binder that was four inches thick almost and it was the most organized, professional approach to investing I’ve ever seen. And to anybody who’s looking at creating a portfolio, start with that, start with being organized. Have everything printed, yearly tax returns, yearly lease agreement, property tax bills, maintenance fee schedules because when you need to apply for a mortgage and you have multiple, multiple properties being organized will make that application process so seamless and easy. So that’s step one.

Mortgage Jake: Now, you’re looking at creating a portfolio of properties to invest in down the road today. Let’s say you own one, you want to buy second and a third, and I hear that a lot. I hear people saying, “I’d like to get into three, maybe four by the end of 2020, 2021, et cetera.” Looking at both the pre-construction and the resale markets the second income considered, definitely open a holding corporation and try and buy these properties under your hold corp. A lot of investment banks, banks who are investing in this space will take you a lot more seriously and you’ll have more opportunity to spread your risk around with various institutions.

Mortgage Jake: The third thing I’ll say to a lot of investors is don’t just look at rate. Look at your yield. Remember, as an investor, if you’re paying a slightly higher interest rate, that means you are writing off more interest against the income that you’re bringing in. And that’s a huge advantage to you because now you’re hopefully going to be cash flow neutral on your tax returns and you won’t pay any marginal taxes on your investment income from your properties.

Mortgage Jake: Fourth. Remember, lenders are becoming more and more strict. The majority of them have a maximum five door, six door policy, but that’s only internally. So for example, a bank like a Scotia will say, “We will finance up to six properties under your own name with us.” Well, they may do it if you have eight properties five with them, two with another lender and there you go. So don’t just limit yourself to working with only one institution. The more you borrow from them, the less likely they will continue lending to.

Mortgage Jake: Another idea that I’ve recently uncovered which is a fantastic idea. If you own multiple, multiple, probably six, seven, eight, work with the commercial team of that bank. The commercial team a treat you as an investor. Yes, you have a full-time job, you’re very successful at that part of your employment, but if you’re working with a commercial side of the investment bank, like a TD, like a BMO or RBC. They will look at your portfolio completely differently than the residential underwriting arm, where they’ll be a little bit more limited.

Mortgage Jake: So those are the various things investors have to do. Be open to working with alternative lenders that will still finance you at 80%, no problem on your seventh or eighth property. Be open to working with a broker. If you’re running into headwinds with the banks, speak to the alternative industry like us and we will help you figure out what’s possible, what isn’t. At the end of the day, the ultimate goal is long, long term. Don’t be worried about a 1% fee that you may have to pay because if that 1% fee will translate to a 20% return over 5 years or 10 years, well fantastic, good, it’s worked out for you.

Mortgage Jake: So look at the big picture is what I say to every investor. I find a lot of investors get bogged down by the tiny details and are unwilling to pay the fees or unwilling to pay a slightly higher rate where they’re not remembering that, hey in five years, I would have made so much more of my money back if I did this investment today.

Andrew la Fleur: Yeah, absolutely. That’s a great advice looking at the big picture. It’s something I remind investors with five plus properties all the time. That is, don’t get too focused on any one individual property, any one individual mortgage, any one individual interest rate or amortization that you’re paying. When you have four, five, six, seven, eight properties, you got to look at holistically, at your whole portfolio. So if you have to pay a little bit of an extra premium on this particular property, don’t worry about it, you got an amazing rate on properties one and two.

Andrew la Fleur: If you’re cash flow negative on this one property, don’t freak out too much about it because you’ve got plenty of positive cash flow over there on properties three and four, whatever it might be. So just taking that holistic approach and like you said, understanding that you’re building something for the long term, you’re building something much bigger than any one individual property or mortgage that you’ve got.

Mortgage Jake: The same thinking applies when you’re talking to a stock investor. A stock investor has 10 holdings in their portfolio. Some of them are not doing this great. Some of them, the dividends are a bit lower. Otherwise, other ones, they’re making it up. There’s an opportunity to buy a premium stock at a premium price, over the long term it’s still expected to do well. It’s the same approach, look at it as an investor and like you said, if you can balance things out and have a long-term view and keep accumulating over that period of time, how many people that we know have done tremendously while doing that approach, right?

Andrew la Fleur: Who, just specifically, what banks or lenders are you finding are the best at the moment? Because rules and policies of banks are always changing and it’s different every year, it’s different every quarter it seems, but at the moment if somebody comes to you with they say they have five properties and they need mortgage number six or mortgage number seven. Who’s playing ball with those types of clients right now? Who you’re finding is good to work with?

Mortgage Jake: First I just want to explain to your clients that each bank has a different way of offsetting the rental income. A lot of my clients call me and say, “Hey, I own a condo. It rents for 2,000 and my expenses are 2,000. Therefore, it’s a wash.” Unfortunately the banks don’t look at it that way because they build in certain things like they can see rage management fees, et cetera. So they all have a different way of looking at things.

Mortgage Jake: The bank that I’m having a lot of success with investors buying the fifth, the sixth, the seventh property is called Wealth One Bank. They have a very good common sense approach, and that’s what we need, is a common sense approach to offsetting income from an investment portfolio. Scotiabank is phenomenal as well. Scotiabank, although it uses only 50% of rental income. It does not take into account maintenance fees, taxes, utilities at all. So it’s almost like a 75 to 80% offset with respect to how they do it.

Mortgage Jake: Now, TD Bank has a great commercial arm when you’re talking eight, nine, ten plus, same with RBC. And if you are a high net worth individual and if your net worth is made up of properties and of liquid capital, whether it’s stocks, investments and other, Manulife has a great net worth lending arm and the major banks also have a great private banking. So if you do fall under the private banking guidelines, consider working with that department because they look at ratio offsets a little differently and they look at net worth as a very strong key component.

Mortgage Jake: And obviously, a lot of the alternative lenders are fantastic at rentals. Equitable Bank, Home Trust, Optimum Bank. These are very well financed, very well capitalized lenders that although they will charge you a slightly higher rate, they are phenomenal when it comes to offsetting the risk and offsetting the ratios.

Mortgage Jake: There’s finally the credit unions. Meridian Credit Unions got a phenomenal self-employed investor program called NIQ, non-income qualifier. It doesn’t mean you can’t have income. It means you make a really good gross income and you have expenses because you run your own business and the bank sees a common-sense approach of using a number between your gross and your personal net. Now, they’re a little bit more strict with respect to how many properties you will own, but they’re still really good in terms of if you’re getting into a second and a third, especially for the self-employed people.

Mortgage Jake: So I’ll say if you’re fully income qualified, you work for a Fortune 500 company or a company we make good income, go with one of the banks. If you’re self-employed investor, we’re going to go with one of the alternative lenders or credit union, where rate may not be the best, but you’re going to get an awesome opportunity to get into investments that you may not have with your bank.

Andrew la Fleur: Jake, fill in this sentence for me, fill in this line. Real estate investors need a great mortgage broker in 2019 because …

Mortgage Jake: We have access to, and I know some say 30, the reality is we have access to 10 to 12 different lenders. We know how each lender will offset the ratios and we know based on the client profile where that’s going to fit. And not to mention my turnaround, our turnaround in the broker community is usually twice as fast as the bank’s. Because we … Well, I’ll be honest with you-

Andrew la Fleur: The banks are very slow.

Mortgage Jake: They’re very slow. They’re three to five business days. You can never go firm. They have no clue if you’ll be approved or qualified. And I want to say one other thing to investors that I’ve recently discovered. A lot of investors have gone to their bank for a pre-approval on a pre-construction. Well, guess what? All of that information is sitting there. When you’re buying a pre-construction property and say you bought three units that are coming up due 2019, 2020, 2021 and now you want to buy a fourth property. If you’ve gone with all of your business to one bank, that bank’s going to look at all the other applications and say, “Sorry, you don’t qualify for a fourth to fifth.”

Mortgage Jake: If you spread your business around with different banks, you have a lot better chance. So be bank agnostic. Be results-driven is what I say. And that’s why in my opinion working with a broker who has connections inside his or her network and outside, and I work with some of the banks that don’t necessarily work with brokers because we all have to try and get the deal done for the client. So we are in a referral basis. So that’s why in my opinion, it’s a great idea to work with a broker to at least discuss the options. And if your bank’s giving you options, compare them at that point is your good time to do that as well.

Andrew la Fleur: Great advice, yeah. The mortgage market and how you get a mortgage and what type of mortgage you get and who you approach and the process, it’s very different today, in 2019 than it was in 2017, 2016, 2015. A lot of people who’ve maybe bought pre-construction three four years ago and now they need mortgage today, we’ve talked a lot about it here, but what advice would you give them in terms of understanding how mortgages and getting a mortgage has changed from three, four years ago.

Mortgage Jake: It used to be really funny in 2013 through ’15 roughly or before, the good old days as I call them. A client would call me and say, “Hi, my name is Tom. I got your number from Andrew. I bought a condo. What’s your rate?” Literally I could tell them the best rate within 30 seconds to a minute. Now it requires a 10 to 15 minute call because I need to see which bucket they will fall under. If it’s a simple first-time investor, it’s a little bit easier. The more obstacles we face, now our lender choices may decrease.

Mortgage Jake: So the biggest difference between today and then is again, sounding bias, but working with someone who does this for a living full-time, whether it’s the bank broker or a mortgage broker, whoever, you’re going to get the best options for you on the spot from that person. The second thing I want to say if you purchased before the first set of rule changes, so prior to November 2016 when the first rule changes were announced you can still qualify using the old rules, which most banks have no clue that that’s even possible but they’re called grandfather or grandmother, or however you want to say that, the way.

Mortgage Jake: If I purchase a condo that’s closing in for years, it’s the pre-construction, and then the rule changed it changes happen, the government made sure that those people were not going to be subject to the stress test. Now, some of them will be if they want to go variable, if they’re the investors, but not everybody will be. So remember, if you’re having difficulty qualifying today because of the stress test and if you bought before the first round of rule changes, there is a massive opportunity for you to work with a broker who will know which lenders will still use the old rules to qualify you in them.

Andrew la Fleur: Wow. See, I’m learning here today. I didn’t know that myself. I assume that everybody was … That that loophole or whatever you want to call it was gone and everybody was under the stress test.

Mortgage Jake: It all depends on when you signed the contract because if you signed the contract at a time where the test was not around, then-

Andrew la Fleur: Which plenty of people did.

Mortgage Jake: Plenty of people did, yeah, especially now, it’s 2019. So there’s still kind of in the 2019, 2020 timeframe where they’ll be closing and now they’re getting [inaudible 00:39:13] occupancy, file occupancy, et cetera. Again, now is the time to consider talking to a broker if you purchased before 2016 October, October or November, one of those two dates, I’ll tell you exactly and we’ll tweet it out, but you’re still subject to qualifying under the old rules provided all else is equal, credit’s good, income’s good, et cetera.

Mortgage Jake: One other thing that we haven’t talked about that I wanted to say is market opportunity, assignments are still very popular, especially for investors. A lot of people might be looking today in the market and finding assignment opportunities. Assignments can still be financed at the current market price and not the original purchase price. So that’s an opportunity for people to consider up to 80%, so 20% down for investors as well. A lot of banks, Scotiabank is doing those deals. So that’s just another thing out there that people can get a good deal on.

Andrew la Fleur: Great. Yeah. So getting financed on the current market value as opposed to the original purchase price. So if you’re coming in as an investor buying an assignment, you don’t have to come up with a massive amount of cash to close-

Mortgage Jake: That’s right.

Andrew la Fleur: … which is a huge advantage. So some lenders are still doing that, that’s good to hear. Jake, it’s been great chatting with you as always. If people want to get ahold of you, which I’m sure they will after listening to your insights here, what is the best way for them to do that?

Mortgage Jake: So facebook.com/mortgagejake. They can always call me or text me at 416-910-4448. Or email me, it’s jake@mortgagejake.com, very simple email address to remember. I’m on Twitter @mortgagejake as well. I’m on Instagram. You can find me anywhere in the world, you know where I’ll be and I’ll be more than happy to speak to anybody that has any questions, any problems, any … Even if you’re asking for advice or a second opinion, believe me, not every one of my clients obviously closes a deal with me.

Mortgage Jake: My goal is to kind of, like you said, speak the truth, debunk some myths, figure out option B, option C. And especially if you’re running into problems with your bank, if they’re taking forever to turn around, if another broker is not giving you what you’re looking for, speak to me, I’ll tell you if it’s a good deal or not and hopefully we’ll establish a long-term relationship. Mortgage Jake is my name and that’s where you’ll find me all over the place.

Andrew la Fleur: Awesome. Great. Thanks so much Jake. Talk to you soon.

Mortgage Jake: All right. Thank you. Talk to you soon. Have a good day.

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