@streetwiseinvestor could you speak to whether the benefits would outweigh the penalties for changing your mortgage/ refinancing. I think that would be super helpful for everyone. Thank you!
I agree. The information gave for the line of credit $50,000 is a big mistake and customers can make happy numbers that are not a real cost , it is a $247 per month ! You said $250 year
Yes . I meant to say 250 per month but does not change the overall strategy or the cash flow benefits. The 250 per month would be payable as the line reaches a 50,000 balance ; which will take a while ( 18 months in this case ). In the early stages of using the line : that payment would be much smaller per month . This strategy is aimed at solving a cash flow crunch every month .
@@daliabarsoum2055 I enjoyed viewing this episode, it was great, thank you Dalia! I wanted to make sure I had not missed something new that clients could benefit from even more, that's all 🙌👍👍
Great stuff. Question on method 4, what happens if you blow up the trigger rate? Does your static payment need to be renegotiated to make sure you make that interest payment? Thanks :)
Hi Francis . Some clients who took a variable rate when the rate floor was very low (2020) have either hit their trigger rate or about to with the next BOC increase because of the fast increases to the rate and the magnitude of those increases . If someone is to take a new variable today . It is unlikely they would hit the trigger rate any time soon. While there is room for the BOC to increase the overnight rate ( with one coming up in October 2022) it is unlikely that we will see several fast and aggressive increases like the ones we saw for the past few months since March 2022. The BOC has front loaded the rate increases over the past few months
May I use my credit card for investment related purchase and pay off the credit card by HELOC to take adventage off tax credit? Or do the purchase have to go HELOC directly?
Are you referring to using a credit card for down payment and closing costs or to manage the property expenses ? I don’t suggest you use the credit card for the down payment and closing costs . The interest cost is significant and lenders are not going to like the idea as it is not looked at as skin in the game . When you use a HELOC to purchase an investment , the interest is tax deductible ( Cherry : pls jump in to confirm ) as you are leveraging to invest
@@daliabarsoum2055 thank you very much. investment related purchase I mean like gas for a car, insurance, repair material etc. And then pay the credit card off by my HELOC. May I deduct those purchases as tax deductible?
@@unobono Cherry is best to advise on whether or not that would be tax deductible. What I know is : if these expenses are related to the investment property , you can expense them on the income and expense statement and that would reduce the profit from the property that you get taxed on.
@@unobono You would be able to deduct the portion of interest incurred for paying off the business expenses. Documentation is the key however. You need to be able to document and prove to CRA that the interest is incurred on loan that is used primarily for business purpose.
Great staff however what you say about $50,000 heloc or secured line of credit at 5% rate cost customer $250 a year is a mistake, it is the cost of a month! Please fix this information!
Hi Maria. Yes that is right . The payment is monthly not annually at 50,000 ( prime plus .5 ) /100/12 . It gets to 250 when the balance reaches 50,000. So every month , there is a gradual impact on the net cash flow but the strategy still works as intended
Hi Dalia, I see you said it is a "technical mistake" but still is a good option... however in the mortgage industry, we have to be very careful with the technical mistakes teaching customers, because, in the end, the cashflow is not going to be received as you mentioned in your video. Additionally getting a new debt to pay another debt (Mortgage payments) is not a good option in my opinion. You said in 18 months the line of credit will be paid off with the mortgage payments, however, it is not possible Have a good day.
@@mariaclaraordonezdominionl2172 Lets not loose sight of the big picture here. The average monthly cash flow a client would accumulate after all expenses ( Rent - Expenses - LOC payment ) is $2300 per month . The total cash in the account by the end of the 18 months would be in the 40K range. Now , a client can sleep at night, carry the property , not be forced to sell and use the cash reserve at the end of the period to clear most of the line. We have a detailed sheet outlining the numbers from month 1 - month 18 . If you wish to get a copy , feel free to email us
I think the accumulated principal you said in the email you sent to me, goes to the mortgage principal because the payment if for the mortgage and not to the HELOC, is correct? Thanks.
@@mariaclaraordonezdominionl2172 when making a monthly payment on the mortgage : the principal pay down increases the LOC limit on an advanceable line. this is separate from the net cash flow accumulated over time , which adds up close to the 40K I mention. if the client does not spent that cash , then they can use it to clear the bulk of the line of credit balance . Does this answer your question ?
Vadim . I agree with you about making life style changes to adapt . When combined with solutions to generate more income from the property and debt restructuring ( which is what I discuss here ) , the impact is compounded
@@daliabarsoum2055 sure, but changing themortization from 25 to 40 years can be a long-term effect. You know where to save $100 a month. My recommendation will always be to go out less and save more money this way. I personally cannot recommend my clients or even in myself to change the amortization from 25 to 40 years in order to save $100 a month.
@@307586040 on a 500K mortgage where the rate has now reached 5% let's say. Extending amortization from 25 years to 30 years would generate about $240 in additional cash flow. If we want to offset the effect of extending the amortization , the client can go with a bi-weekly accelerated payment , which would shorten the effective amortization on the loan.
The bi-weekly accelerated payment makes a lot of sense. A couple going out for a restaurant with a bottle of wine is easily $250. By trimming the "fat" and unnecessary expenses, you can pay the extra mortgage. This is my personal opinion.
@@307586040 thanks for your comment. I also have clients struggling to keep their investment properties and found themselves opting to choose to work part time to make ends meet. Amortization period or not is an option that client can change at the next renewal term as well. The intent of this video is to help people who are trying to find ways to ease the impact from the interest rate hike. As mentioned in the video, increasing income and lowering the cash flow should be used together. Lowering the cash out flow is one option, at the end of the day, it goes back to the long-term objective of the clients. As a service professional, a one size fits all solution probably rarely works for all clients. We're providing different options to trigger the focus. Cutting expenses help, but in a real estate rental portfolio, there's only so much you can cut.
@streetwiseinvestor could you speak to whether the benefits would outweigh the penalties for changing your mortgage/ refinancing. I think that would be super helpful for everyone. Thank you!
Thank you ladies for the tip!
Glad you find it useful 👌
Amazing information, thanks a lot !
Glad it's helpful
A $50k loc at p+.50 today is an int only mthly pmt of $247, I think you said $250 annually?
Hi Stephanie. Yes , $250 monthly not annually . 50,000 X ( prime +.5) / 100/12 . So the cash flow would be slightly lower . Thank you
I agree. The information gave for the line of credit $50,000 is a big mistake and customers can make happy numbers that are not a real cost , it is a $247 per month ! You said $250 year
Yes . I meant to say 250 per month
but does not change the overall strategy or the cash flow benefits.
The 250 per month would be payable as the line reaches a 50,000 balance ; which will take a while ( 18 months in this case ).
In the early stages of using the line : that payment would be much smaller per month .
This strategy is aimed at solving a cash flow crunch every month .
@@daliabarsoum2055 I enjoyed viewing this episode, it was great, thank you Dalia! I wanted to make sure I had not missed something new that clients could benefit from even more, that's all 🙌👍👍
Great stuff. Question on method 4, what happens if you blow up the trigger rate? Does your static payment need to be renegotiated to make sure you make that interest payment? Thanks :)
Hi Francis . Some clients who took a variable rate when the rate floor was very low (2020) have either hit their trigger rate or about to with the next BOC increase because of the fast increases to the rate and the magnitude of those increases .
If someone is to take a new variable today . It is unlikely they would hit the trigger rate any time soon. While there is room for the BOC to increase the overnight rate ( with one coming up in October 2022) it is unlikely that we will see several fast and aggressive increases like the ones we saw for the past few months since March 2022. The BOC has front loaded the rate increases over the past few months
Is it possible that the lender will call the HELOC in case home values continue to decline?
Not likely in my humble opinion, as long as you are able to service the debt. But the terms may change at mortgage renewal time
May I use my credit card for investment related purchase and pay off the credit card by HELOC to take adventage off tax credit? Or do the purchase have to go HELOC directly?
Are you referring to using a credit card for down payment and closing costs or to manage the property expenses ?
I don’t suggest you use the credit card for the down payment and closing costs . The interest cost is significant and lenders are not going to like the idea as it is not looked at as skin in the game .
When you use a HELOC to purchase an investment , the interest is tax deductible ( Cherry : pls jump in to confirm ) as you are leveraging to invest
@@daliabarsoum2055 thank you very much. investment related purchase I mean like gas for a car, insurance, repair material etc. And then pay the credit card off by my HELOC. May I deduct those purchases as tax deductible?
@@unobono Cherry is best to advise on whether or not that would be tax deductible. What I know is : if these expenses are related to the investment property , you can expense them on the income and expense statement and that would reduce the profit from the property that you get taxed on.
@@unobono You would be able to deduct the portion of interest incurred for paying off the business expenses. Documentation is the key however. You need to be able to document and prove to CRA that the interest is incurred on loan that is used primarily for business purpose.
I am living in Newfoundland May I get your mortgage broker service for newfoundland or do you only do the service for Ontario?
We currently service investors in Ontario, Alberta, BC, Nova Scotia , New Brunswick , Saskatchewan and Manitoba
Great staff however what you say about $50,000 heloc or secured line of credit at 5% rate cost customer $250 a year is a mistake, it is the cost of a month! Please fix this information!
Hi Maria. Yes that is right . The payment is monthly not annually at 50,000 ( prime plus .5 ) /100/12 . It gets to 250 when the balance reaches 50,000. So every month , there is a gradual impact on the net cash flow but the strategy still works as intended
Hi Dalia, I see you said it is a "technical mistake" but still is a good option... however in the mortgage industry, we have to be very careful with the technical mistakes teaching customers, because, in the end, the cashflow is not going to be received as you mentioned in your video. Additionally getting a new debt to pay another debt (Mortgage payments) is not a good option in my opinion. You said in 18 months the line of credit will be paid off with the mortgage payments, however, it is not possible Have a good day.
@@mariaclaraordonezdominionl2172 Lets not loose sight of the big picture here. The average monthly cash flow a client would accumulate after all expenses ( Rent - Expenses - LOC payment ) is $2300 per month . The total cash in the account by the end of the 18 months would be in the 40K range. Now , a client can sleep at night, carry the property , not be forced to sell and use the cash reserve at the end of the period to clear most of the line. We have a detailed sheet outlining the numbers from month 1 - month 18 . If you wish to get a copy , feel free to email us
I think the accumulated principal you said in the email you sent to me, goes to the mortgage principal because the payment if for the mortgage and not to the HELOC, is correct? Thanks.
@@mariaclaraordonezdominionl2172 when making a monthly payment on the mortgage : the principal pay down increases the LOC limit on an advanceable line. this is separate from the net cash flow accumulated over time , which adds up close to the 40K I mention. if the client does not spent that cash , then they can use it to clear the bulk of the line of credit balance . Does this answer your question ?
I am sorry but none of these ideas actually make sense. Go out less and you will save more money this way.
Vadim . I agree with you about making life style changes to adapt . When combined with solutions to generate more income from the property and debt restructuring ( which is what I discuss here ) , the impact is compounded
@@daliabarsoum2055 sure, but changing themortization from 25 to 40 years can be a long-term effect. You know where to save $100 a month. My recommendation will always be to go out less and save more money this way. I personally cannot recommend my clients or even in myself to change the amortization from 25 to 40 years in order to save $100 a month.
@@307586040 on a 500K mortgage where the rate has now reached 5% let's say. Extending amortization from 25 years to 30 years would generate about $240 in additional cash flow. If we want to offset the effect of extending the amortization , the client can go with a bi-weekly accelerated payment , which would shorten the effective amortization on the loan.
The bi-weekly accelerated payment makes a lot of sense. A couple going out for a restaurant with a bottle of wine is easily $250. By trimming the "fat" and unnecessary expenses, you can pay the extra mortgage. This is my personal opinion.
@@307586040 thanks for your comment. I also have clients struggling to keep their investment properties and found themselves opting to choose to work part time to make ends meet.
Amortization period or not is an option that client can change at the next renewal term as well.
The intent of this video is to help people who are trying to find ways to ease the impact from the interest rate hike.
As mentioned in the video, increasing income and lowering the cash flow should be used together. Lowering the cash out flow is one option, at the end of the day, it goes back to the long-term objective of the clients.
As a service professional, a one size fits all solution probably rarely works for all clients.
We're providing different options to trigger the focus. Cutting expenses help, but in a real estate rental portfolio, there's only so much you can cut.