Creating A Pension Plan Part 2
Michael Hallett • May 31, 2016
Every good plan starts with building a foundation, the plan will rely on the foundation for years to come. Now that you have decided to pursue the acquisition of real estate (property #1 purchased and successfully rented...check!) as your vehicle to build wealth it's time to stay the course and add the next layer. We will continue on from Part 1 and build upon it. The information here can be duplicated for property #3, 4...and so on.
For this scenario we are considering the acquisition of property #2 at the end of year 3. Based on the estimated market value, the subject property will cost $245,863 to purchase and (in the perfect world) we are buying another one in the same building. Sticking with a simplistic scenario the current market value of property #1 is $245,863. The plan that had been laid out in the beginning comprised the combination of leveraging equity from other rental properties and savings to acquire the 'next' property.
End of Year 3
Estimated market value $245,863
Outstanding mortgage balance $167,227
Access to equity $49,172 (*80% of the market value of the subject property must remain unleveraged, determined by an appraisal)
New mortgage amount on P#1 $196,690
Funds leveraged from P#1 $29,463
Balance from own resources $19,710
20% down payment for P#2 $49,173
Early prepayment penalty P#1 $1,104 (3 months interest)
The balance of funds required were available because instead of making extra payments against your principal residence (up to a maximum of 20%) you were directing that amount into a 'rental property purchase' savings account. Over the past 3 years the account has ballooned to over $20,000.
Through the necessary qualifying process we have now established the new (re-financed) term on property #1 for $196,690 to assist with acquiring property #2. We will also utilize an economic rent letter to help service the debt unless there is an existing renter (and rental/lease agreement ) currently in place.
Purchase Price: $245,863
Down Payment: $49,172 (20% minimum, lender may request more)
Mortgage Amount: $196,690
Variable at 2.40% (P-0.30%) 5 year term CLOSED 30 year amortization
Monthly Mtg Payment: $765.77
Est. Monthly Strata: $250 (costs to operate have increased)
Est. Monthly Property Tax: $117 ($1,400/year)
TOTAL Monthly Payment: $1,132.77
Property Transfer Tax:
$2,917.26 (paid at completion, cannot be rolled into the mortgaged. It is calculated based on 1% of the 1st $200,000 and 2% on the remaining balance.) To calculate Property Transfer Tax use this calculator.
Appraisal:
$300 (required to validate the purchase price because there is no mortgage insurer involved; CMHC, Genworth or Canada Guaranty).
Home Inspection:
$400 (highly recommended)
Title Insurance:
$200 (In short, title insurance is an assurance as to the state of title of a given property. In practical terms, it protects lenders and purchasers against loss or damage suffered due to survey problems, defects in title and other matters relating to title as specified in the policy.
Approx lawyer fees:
$1,500
The cost to acquire the property was $5,317.26
The act of buying rental properties should be treated as a business transaction. The thought of falling in LOVE with a potential property should be purged from your mind completely. When you are search for a desirable property do your homework; look into the Official Community Plan with the city, if you have a higher budget you might want to consider a 2 bedroom unit vs 1 bedroom, know what the rental restrictions are within the strata prior to buying and most importantly contact your Mortgage Broker prior to meeting with Realtor so that he/she can assist with the structuring as all lenders employ different ways of underwriting rental mortgage applications. The numbers have to make sense to give yourself a chance to build your real estate empire.
*Based on today's re-financing guidelines. Please check with your Mortgage Broker before executing your plan.
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One of the most common questions, “how long does it take to get pre-qualified?” My response, “how fast can you provide the information I need.”
Playing in the forest today. Always fun exploring. #mountainbikingmortgagebroker
Mortgage Brokering meets mountain biking and craft beer. A couple months ago I set for a bike ride with the intention of answering few mortgage related questions, mission accomplished. Any good bike ride pairs nicely with a tasty beer which we enjoyed @parksidebrewery. Hope you see the passion I have for brokering, biking and beer. @torcabikes #mountainbikingmortgagebroker
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Spotted a ski-bunny today @kirstinjhallett so I trapped ‘er. 📸 credit @troy.hartley
Aidan leading the pack up the Lemming Line in seek of fine fresh powder.
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Aidan and I braved the -19C temperature and windy conditions for the boot to knee deep turns...it was a no-brainer.
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Snow report for today was boot to knee deep in places. Simply an awesome day rippin’ with the kids, I had to show them that I still got it. 📷 credit @jhalskiing
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Extreme tubing, watch until the end. Aidan manages to hold on.
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He was OK, thumbs up. The roll cage and 5-point seat belt did its job.
My sons intro to operating a side-by-side on his own. Watch to the end.
The Lookout over looking Tulameen BC. Took some 4x4ing to get there, but we did it.
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This would have been a fun stunt once upon a time!
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My ski buddy getting untracked turns. It was knee to thigh deep all day for him, only shin to knee for me.
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This is a great start to the day!
No better way to share the great outdoors than with friends. @troy.hartley @mike_ilic711 @j_penner70
The ski out back to the truck was more of an adventure than we bargained for...
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Thank god we are all narcissistic and have the ability to take pictures of ourselves 🤪. This is taken pre-turkey dinner, I’m sure we will all be back in our comfy clothes soon! Merry Christmas!
The crew shredding some turns , it was a 23,000 vertical foot kind of day.
Happy belated Hanukah, Merry Christmas and Happy Holidays to all. Be sure to enjoy the festivities.
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A tasty beverage while on the water yesterday from @backcountrybrewr and @backcountrybrewing
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Whistler slick rock is my favourite.
Wood to wood gap in Whistler.
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And now the training starts for Paris 2024 summer olympics.
Archery target: before, during and finished.
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Pre-dinner antics...it’s totally safe!
Aidan is captaining the watercraft, mom in just the passenger. Kalamaka Lake.
#Drewmboat camo @parksidebrewery
Safety first when roasting marshmallows.
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Raw kale. Just not the same as a kale caesar salad.
Saratoga Beach fire.
Canadian tuxedo.
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Going vertical. #slickrock
I have a ski buddy, now it’s time to train a biking buddy.
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Raw and unedited. Old school skinny with a drop at the end.
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Zoa Peak, Coquihalla summit 1,500 vertical metres of skiing.
Distancing myself from the real world!
The dry land version of the @andrei_svechnikov37 lacrosse-style goal executed Aidan.
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Does anybody need or want any firewood? It’s free...you come pick it up.
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Mortgage Registration 101: What You Need to Know About Standard vs. Collateral Charges When you’re setting up a mortgage, it’s easy to focus on the rate and monthly payment—but what about how your mortgage is registered? Most borrowers don’t realize this, but there are two common ways your lender can register your mortgage: as a standard charge or a collateral charge . And that choice can affect your flexibility, future borrowing power, and even your ability to switch lenders. Let’s break down what each option means—without the legal jargon. What Is a Standard Charge Mortgage? Think of this as the “traditional” mortgage. With a standard charge, your lender registers exactly what you’ve borrowed on the property title. Nothing more. Nothing hidden. Just the principal amount of your mortgage. Here’s why that matters: When your mortgage term is up, you can usually switch to another lender easily —often without legal fees, as long as your terms stay the same. If you want to borrow more money down the line (for example, for renovations or debt consolidation), you’ll need to requalify and break your current mortgage , which can come with penalties and legal costs. It’s straightforward, transparent, and offers more freedom to shop around at renewal time. What Is a Collateral Charge Mortgage? This is a more flexible—but also more complex—type of mortgage registration. Instead of registering just the amount you borrow, a collateral charge mortgage registers for a higher amount , often up to 100%–125% of your home’s value . Why? To allow you to borrow additional funds in the future without redoing your mortgage. Here’s the upside: If your home’s value goes up or you need access to funds, a collateral charge mortgage may let you re-borrow more easily (if you qualify). It can bundle other credit products—like a line of credit or personal loan—into one master agreement. But there are trade-offs: You can’t switch lenders at renewal without hiring a lawyer and paying legal fees to discharge the mortgage. It may limit your ability to get a second mortgage with another lender because the original lender is registered for a higher amount than you actually owe. Which One Should You Choose? The answer depends on what matters more to you: flexibility in future borrowing , or freedom to shop around for better rates at renewal. Why Talk to a Mortgage Broker? This kind of decision shouldn’t be made by default—or by what a single lender offers. An independent mortgage professional can help you: Understand how your mortgage is registered (most people never ask!) Compare lenders that offer both options Make sure your mortgage aligns with your future goals—not just today’s needs We look at your full financial picture and explain the fine print so you can move forward with confidence—not surprises. Have questions? Let’s talk. Whether you’re renewing, refinancing, or buying for the first time, I’m here to help you make smart, informed choices about your mortgage. No pressure—just answers.
How to Use Your Mortgage to Finance Home Renovations Home renovations can be exciting—but they can also be expensive. Whether you're upgrading your kitchen, finishing the basement, or tackling a much-needed repair, the cost of materials and labour adds up quickly. If you don’t have all the cash on hand, don’t worry. There are smart ways to use mortgage financing to fund your renovation plans without derailing your financial stability. Here are three mortgage-related strategies that can help: 1. Refinancing Your Mortgage If you're already a homeowner, one of the most straightforward ways to access funds for renovations is through a mortgage refinance. This involves breaking your current mortgage and replacing it with a new one that includes the amount you need for your renovations. Key benefits: You can access up to 80% of your home’s appraised value , assuming you qualify. It may be possible to lower your interest rate or reduce your monthly payments. Timing tip: If your mortgage is up for renewal soon, refinancing at that time can help you avoid prepayment penalties. Even mid-term refinancing could make financial sense, depending on your existing rate and your renovation goals. 2. Home Equity Line of Credit (HELOC) If you have significant equity in your home, a Home Equity Line of Credit (HELOC) can offer flexible funding for renovations. A HELOC is a revolving credit line secured against your home, typically at a lower interest rate than unsecured borrowing. Why consider a HELOC? You only pay interest on the amount you use. You can access funds as needed, which is ideal for staged or ongoing renovations. You maintain the terms of your existing mortgage if you don’t want to refinance. Unlike a traditional loan, a HELOC allows you to borrow, repay, and borrow again—similar to how a credit card works, but with much lower rates. 3. Purchase Plus Improvements Mortgage If you're in the market for a new home and find a property that needs some work, a "Purchase Plus Improvements" mortgage could be a great option. This allows you to include renovation costs in your initial mortgage. How it works: The renovation funds are advanced based on a quote and are held in trust until the work is complete. The renovations must add value to the property and meet lender requirements. This type of mortgage lets you start with a home that might be more affordable upfront and customize it to your taste—all while building equity from day one. Final Thoughts Your home is likely your biggest investment, and upgrading it wisely can enhance both your comfort and its value. Mortgage financing can be a powerful tool to fund renovations without tapping into high-interest debt. The right solution depends on your unique financial situation, goals, and timing. Let’s chat about your options, run the numbers, and create a plan that works for you. 📞 Ready to renovate? Connect anytime to get started!
