Transcript of the Podcast
The following is a transcript from my Mississauga Real Estate Podcast episode 13. We interview Roberto Pelaccia, a mortgage expert with Key Mortgage Partners, and he explains how to pay off your mortgage faster by utilizing the equity in your existing home to make additional investments. He also shows how, OSAP and student loans notwithstanding, you can use this technique to fund college education for your children. Read the full transcript below, or listen to the broadcast on this website on the podcast page.
Randy Selzer: Hello, everybody. Welcome back to my podcast. It’s Randy Selzer here. Today we have a special guest, Roberto Pelaccia is here and he is a mortgage professional with Key Mortgage Partners. Welcome, Roberto. How are you?
Roberto Pelaccia: Well, thank you, Randy for having me. I appreciate it.
Randy Selzer: No problem. It’s a pleasure to have you here. Today, we’re going to have a discussion about two things. Number one is how to pay off your mortgage for those of you who have a mortgage. And number two is how to pay for your kids’ education. And so, that’s very interesting. I’m sure there’s going to be a lot of people who are going to want to hear about that. But before we get started on the main topic, Roberto, tell us a little bit about yourself. I know you’ve been in the business for a while here in Mississauga, and tell us a little bit about your business in the mortgage industry.
Roberto Pelaccia: Great, thanks. I’ve been a mortgage agent for the last six years and I’m with a firm. We have an office in Brampton, but I do … I am mobile and I work right across Ontario and I specialize basically in the GTA West out to the Niagara region. And you know, I have been a Mississauga boy my entire life.
Randy Selzer: Oh, you grew up here?
Roberto Pelaccia: Was raised here. Grew up here. Yeah.
Randy Selzer: Good man. Good man.
Roberto Pelaccia: Decided to stay and raise my family here as well. Very proud of that. And yeah, that’s me in a nutshell.
Randy Selzer: What made you decide to get into the mortgage business of all the different things you could have done? How did you happen to get into that?
Roberto Pelaccia: Yeah. Well originally, you know, as someone out of school and in my 20’s, I did business originally, and worked for some banks.
Randy Selzer: We won’t hold that against you.
Roberto Pelaccia: Yeah, yeah, exactly. But over time, I realized with all the credentials and everything, you know, giving people advice about all this money that they have at such young age when I didn’t really have any myself, wasn’t exactly a good fit for me. So, I decided to get into healthcare and I was a full-time paramedic for about six years.
Randy Selzer: Oh yeah? So you were a paramedic?
Roberto Pelaccia: That’s right, I was.
Randy Selzer: The guy in the ambulance helping people?
Roberto Pelaccia: Guy in the ambulance, yeah.
Randy Selzer: Really?
Roberto Pelaccia: 911, yeah.
Randy Selzer: Oh, wow.
Roberto Pelaccia: Yeah. So, I did that for quite a while and-
Randy Selzer: That must have been a very intense job.
Roberto Pelaccia: It was. It was a very good job. Literally changed my life. I was so glad to be a part of that. And still active in other ways in that world. But at that point, I realized I still needed to have a positive impact in people’s lives, but maybe not in the 911 sense.
Randy Selzer: Right.
Roberto Pelaccia: And I decided to get into mortgage lending because I felt that was such a great way to positively impact in someone’s life.
Randy Selzer: Well, that’s a big switch from being a paramedic to being a mortgage person. That’s huge, but that’s great. That’s called a well-rounded life, I think.
Roberto Pelaccia: Yeah. Well, the background helped. The technical vision for that.
Randy Selzer: Yeah. So, what drives you? You’re very successful in the mortgage industry.
Roberto Pelaccia: Well, you know, I love educating people. I think most people don’t have the financial whereabouts to realize that they’re more than just a loan payment, you know? Like a mortgage is an opportunity to really grow your wealth and owning property, and I think a lot of people don’t realize that. They just kind of consider it a shelter and a cost of just living a life.
Randy Selzer: Right.
Roberto Pelaccia: But there is an opportunity there. And I love to expand that with people because they soon realize that, “Yeah, there is a lot more than I can do here to help me and my family.” Randy Selzer: And I can understand that. Where most people really don’t look beyond the fact that they got to make that monthly payment. So, that’s good. And so, I know we talked briefly before we started today and one of the … We’re going to talk today about how to pay off your house, I’m assuming, early, right?
Roberto Pelaccia: Yeah.
Randy Selzer: And with the price … Especially with prices being so high, mortgage amounts being so high these days. Tell us a little bit about how this is going to work.
Pay Off Your Mortgage Faster
Roberto Pelaccia: I know it seems absolutely counter-intuitive, but the reality is if you want to pay off your mortgage and let’s say, fund your kid’s education fund, as well as maybe have a wealthier retirement, the reality is you’re going to have to take on more debt. The point there is that you would take equity that you built from your actual home that you’re living in now, and you would buy an investment that will now then fund those financial milestones that you have come up in the future.
Roberto Pelaccia: So, it’s a game of leverage.
Randy Selzer: Ah.
Roberto Pelaccia: The banks are famous for it. And the reality is, you know, most people just let themselves get used by a bank, right?
Randy Selzer: Right.
Roberto Pelaccia: You just pay your payments, they earn the interest, but you can be a bank too. You can take money and turn it around and make more money with it.
Randy Selzer: So, what you’re saying is then a lot of people, they may have bought their house or their property quite a few years ago, and with the rise in prices, they built up a lot of equity. They’re sitting on that equity, but they’re not really doing anything with it. And what you’re suggesting is that they take some of that equity out and use it to buy further investments, but buy more investments so that at the end of the game they’re going to end up with much, much more?
Roberto Pelaccia: Yeah, absolutely. And you know, at the end of the day, this is … it’s about math, you know? And compounding your investment. So, you would take money, let’s say, $70,000 from your current home and you would reinvest it as a down payment for an investment property. And that investment property will grow. And you know, our historical growth rate in the GTA is about 5% annually for real estate.
Randy Selzer: Right. Roberto Pelaccia: That’s a well-known fact. And if you just let that compound on the actual total price of what you paid for the property, which is the $350K, and you only invested $70K, you’ll see that the numbers shape up quite well. That’s a great investment because over time you’re growing about a 5% on the total amount.
Randy Selzer: Right.
Roberto Pelaccia: You took only that $70,000, and you’re just kind of slowly paying that back or-
Randy Selzer: Having a tenant maybe who will help you to pay it back.
Roberto Pelaccia: Having a tenant will definitely pay down the current mortgage on the property, so that gap in between will be your opportunity to earn quite a bit of money.
Randy Selzer: So what … Who would be a good sort of target audience for this? Who would be a good person or a good demographic that should consider this?
Roberto Pelaccia: Well ultimately, you know, it’s anyone that owns a home should really be doing this because this is your opportunity to now accelerate your financial plan.
Randy Selzer: Okay.
Roberto Pelaccia: So, if you own a home and if you’ve owned it for at least five years, you’ve probably built up enough equity to need to take advantage of the opportunity here. And I always famously asked, you know, “If you had an opportunity to buy a second home when you had the chance, when you were buying your first one, would you take it?”
Randy Selzer: Oh, man. Let me tell you, when I look back in my long career, my 25 years in real estate, that is probably my biggest regret, is that I didn’t buy more real estate back when it was so easy to do. When prices were so low. But it still works, doesn’t it? If prices are going up 5% per year … And, so I hear what you’re saying. So, you take up $70,000, let’s say, you’re buying $350,000, so that’s a condo, I’m assuming. And you get your down payment, you get a good tenant, either through a good realtor or whoever, and you take it just from there, hold it, cash those rent checks every month, and wait for your second property to appreciate in value.
Roberto Pelaccia: Yeah, absolutely. Exactly. So, in 10 years from now, you might see that grow, let’s say, upwards to $7-$800,000 as an investment in itself. So, the asset has grown and compounded, right? And your mortgage might be close to half of where it was originally. So, let’s say it’s about $150,000 versus the close to $300,000 it was before. That difference is your opportunity. All you invested once was $70,000.
Randy Selzer: Right.
Roberto Pelaccia: And you’ve grown that money about 10 times. Yeah, you’ll have to pay some taxes and everything that’s done.
Randy Selzer: Sure.
Roberto Pelaccia: But when it’s all said and done, you’re going to have a pretty big bank account full of money. And that’s essentially how you would pay off your current mortgage, right? So, by that time, your current mortgage would be probably close to half where it is now.
Randy Selzer: Right.
How to Pay for Your Kids – Funding College Education
Roberto Pelaccia: So, you’d be able to pay that off and then also hopefully have some money to fund your kids’ education.
Randy Selzer: Ah, that was the second part of the equation.
Roberto Pelaccia: That is right.
Randy Selzer: Where do you get that money? And having put my daughter through university, man, I know it’s expensive. University school-
Roberto Pelaccia: Plus living expenses.
Randy Selzer: Living expenses, depending on where they’re going to school.
Roberto Pelaccia: So, the ability to take some money that essentially isn’t it coming out of your pocket, right? No after tax dollars from your paycheck and your savings account.
Randy Selzer: Right.
Roberto Pelaccia: Just taking it from the actual property that you already own.
Randy Selzer: It’s just sitting there, right?
Roberto Pelaccia: So, you’re taking the bank’s money.
Randy Selzer: Right.
Roberto Pelaccia: And you’re making more money with it.
Randy Selzer: Interesting.
Roberto Pelaccia: Yeah.
Randy Selzer: Well, that sounds like a very good plan. What about the risks? Are there risks? Any risks in doing this sort of thing?
Roberto Pelaccia: You know, risk is such a subjective thing, right? But I like to think, you know, like the bank, right? And so, we take their perspective in it. So Randy, if you walked into a bank and said, “I had a great business idea. I have $100,000, I was hoping that you can give me some money in a form of a business loan.”
Roberto Pelaccia: Obviously, business is a great way to make money, right? On top of whatever else you’re doing.
Randy Selzer: Sure.
Roberto Pelaccia: What do you think the bank would give you? Just what do you think? Like just sheer your number out.
Randy Selzer: Man, that’s a loaded question.
Roberto Pelaccia: It’s completely a loaded question because-
Randy Selzer: I don’t think I can answer that.
Roberto Pelaccia: Yeah. So, you know, so let’s say maybe at best case scenario, would you agree. maybe they’ll give you another $100,000.
Randy Selzer: Yeah, sure.
Roberto Pelaccia: Kind of match you, match your investment.
Randy Selzer: Yeah, makes sense.
Roberto Pelaccia: Right? I mean, you know, I think that makes sense [crosstalk 00:10:01]. I think that would be-
Randy Selzer: That’s about the max, I think, yeah.
Roberto Pelaccia: I think we’re being optimistic with that. Yeah.
Randy Selzer: Okay. So, let’s take a nice round figure.
Roberto Pelaccia: Okay. So, then you know, another way obviously to earn money is investing in like a portfolio, right? Stock market or whatever it is that you decide to invest in. So, same idea. If you went to a bank and I said, “I have $100,000.”
Randy Selzer: Right.
Roberto Pelaccia: You know, “I’m thinking of managing my own RSP. I got a great strategy. I was hoping that I can fill up my RSP with an extra $100,000 of your money.” What do you think the bank might tell you?
Randy Selzer: Maybe.
Roberto Pelaccia: Maybe.
Randy Selzer: Maybe not.
Roberto Pelaccia: Like maybe, maybe not. Exactly.
Randy Selzer: Right.
Roberto Pelaccia: So, obviously these first two are opportunities, I think people take and decide on everyday, right? Start a little side hustle maybe.
Randy Selzer: Right.
Roberto Pelaccia: You know, try to max out my RSP. So, those are real things I think everyday people do.
Randy Selzer: Right.
Roberto Pelaccia: So, now let’s talk about investment property. You go to your bank and you say, “I have $100,000 in equity in my current home, or maybe in my bank account.”
Randy Selzer: Right.
Roberto Pelaccia: “I was wondering if I can buy a home, how much more would you give me?”
Randy Selzer: Well, there is the answer right there, isn’t it?
Roberto Pelaccia: Yeah. So mathematically, generally they’ll … If you have $100,000, they’re going to … If you can qualify for it, they’ll give you an extra $400,000.
Randy Selzer: Yep.
Roberto Pelaccia: And that’s just fact.
Randy Selzer: Yep, it is.
Roberto Pelaccia: Right? So, that’s not a question yet. Will it happen? Maybe being optimistic? That is-
Randy Selzer: Banks love real estate.
Roberto Pelaccia: Exactly. So, why would they bank on something? You know, because it’s obviously not a lot of risk. And I think if you look at statistics across the board, you’ll see in here all the time how our default rates in Canada are really, really low.
Randy Selzer: Yeah. That’s true.
Roberto Pelaccia: So, real estate is a stable form of investment that banks and wealthy people are making a lot of money all the time. And there’s no reason why anyone that has some equity in their home couldn’t be just like that making money. Be the bank.
Randy Selzer: I totally agree with you, man. Now, I’m a little biased. You know, my bias is towards real estate. I once had a conversation with somebody not long ago who was trying to convince me that the stock market is the place to make money. And what I said to him was that, you know, “I met a lot of people in my career and I don’t think I ever met anybody who got rich on the stock market ever.” Now, I don’t work downtown Bay Street, but I don’t think I’ve ever met anybody truly who got rich on the stock market. However, I have met many, many, many people who have become wealthy through real estate. And I think that’s the answer right there.
Roberto Pelaccia: Absolutely.
Randy Selzer: So again, I’m a little biased being a realtor myself, but the proof is in the pudding.
Roberto Pelaccia: Yeah, absolutely. So, and that’s just saying, you know, like the anxieties of meeting certain financial milestones in your life really are pretty high these days. Education is the most expensive.
Randy Selzer: Oh, yeah.
Roberto Pelaccia: It’s in the bin. We all want our kids to go and get great educations.
Randy Selzer: Yep. It’s true.
Roberto Pelaccia: You know, and then you have just worried about retirement like and being able to retire.
Randy Selzer: Right.
Roberto Pelaccia: This is how you’re going to do it. Buy property, hold onto property, let it grow. Let the magic of compounding interest, let that growth happen on that large number that you paid for the asset, or you didn’t pay that for the asset.
Randy Selzer: Right.
Roberto Pelaccia: You’ve only invested a small … Well usually, typically-
Randy Selzer: Relatively small.
Roberto Pelaccia: … 20%, 25%
of the down payment would be yours. And most of the time, it won’t have to come from your savings account, your RSP account. It Will come from an equity loan from the bank directly.
Randy Selzer: Right.
Roberto Pelaccia: So, you just have to service that and let it simmer and you know, it’s the way that you are going to be able to meet these financial milestones, and it will decrease your anxiety because you’ll have a plan, and it’s actually a plan that’s set in mortar and stone. And break it standing up. You can go and touch and feel it and heck, even if you have to move into it yourself, you have that ability to do so.
Randy Selzer: You’re talking to me, man. I totally agree with what you’re saying. I think it’s an excellent plan. So, how does someone get started to do this? What’s the first step? If someone’s been living in their house for five to 10 years and they know they’ve got that equity there in their house, or maybe a little longer than 10 years, they paid $300,000 for it and today it’s worth a million. They know they’ve got a ton of equity there that’s just sitting there. How do they get started? Let’s say they say, “Okay, I’d like to do this. I’d like to try an investment property.” Maybe a condo, let’s say, and so how do they get started? What’s the first thing they should do?
Roberto Pelaccia: The first thing they should do really is just get someone assess the value of their property. You know, get a real understanding of what it’s worth.
Randy Selzer: Of their existing house?
Roberto Pelaccia: Yeah, their existing property that they have. You know, that’s where the opportunity is for people that already own homes.
Randy Selzer: Okay.
Roberto Pelaccia: And of course, your first time buyers and all those guys, they’re going to have that opportunity maybe in a five years from now.
Randy Selzer: Right? Roberto Pelaccia: Well, after they’ve paid out some of their mortgage and also have seen an increase in value. So, it’s something just to keep in mind now and in the future if you’re starting off. But that’s the first thing. Just get a good assessment of what your house is worth and then take the time to talk to a professional like myself about what the possibilities are for a mortgage, because that’s the name of the game, right?
Roberto Pelaccia: Leverage. So, are you able to actually get the kind of mortgage you’re looking for that can buy a home, a second home, or the rental?
Randy Selzer: Right. And they would still have to go through that process where they have to show some income in order to qualify for the mortgage just like anybody, but they’re getting their down payment from their equity, which is-
Roberto Pelaccia: Absolutely.
Randy Selzer: … beautiful.
Roberto Pelaccia: And then with the equity of their current home, if they don’t have the right products set up, that’d be a part of that whole planning initially of getting pre-qualified for the loan. Understanding that to take on this new equity, you have to make arrangements for the first house that you own.
Randy Selzer: Right.
Roberto Pelaccia: To get that second one. So, kind of planning ahead of time to get that equity out can be really important.
Randy Selzer: It sounds like you’ve done this before though. So, it’s these are definite steps that people can take, and anyone can take with help of a professional like yourself to do it.
Roberto Pelaccia: Yeah. I speak from personal experience, I own properties myself. And I know my financial plan moving forward and I have less anxiety about how I’m gonna pay for my kids’ education, and how I’m going to pay off my mortgage. And I know it will have a positive impact in your life. And I’ve never met anyone that bought a rental property and didn’t think it was a good idea after a few years.
Randy Selzer: Excellent. So, Roberto, that sounds very interesting and I’m sure there’s a lot of listeners on the podcast who might be interested in taking a look at that. What’s the best way for someone to contact you if they’re interested in pursuing this? Taking some equity out of their current property and maybe getting investment property? Is there a phone number or an email where they can reach you?
Roberto Pelaccia: Yeah. The best, and the fastest and easiest way to reach me is either call me or text me on my direct line. 905-466-5023. And that’s probably the easiest way. You can also direct message me on Facebook. I’m there as well.
Roberto Pelaccia: Okay.
Roberto Pelaccia: You can look me up.
Randy Selzer: Okay.
Roberto Pelaccia: Yeah.
Randy Selzer: Okay. And I’m going to put some of the contact information in the comments underneath the podcast, so people will be able to reach you there. Now you told me … Okay, that’s great, but let’s get business out of the way here.
Roberto Pelaccia: All right.
Randy Selzer: You told me you grew up in Mississauga, and so you must know the city pretty well.
Roberto Pelaccia: I feel like I do.
Randy Selzer: And I’m just wondering, what are your favorite places? What are your favorite places to go to in Mississauga with your family, and what do you like to do here in this town?
Roberto Pelaccia: Well, I love the water, and we enjoy fishing.
Randy Selzer: Ah, okay.
Roberto Pelaccia: So, me and my two little girls, they’re nine and seven. We like to go fishing on the Credit.
Randy Selzer: Excellent.
Roberto Pelaccia: A couple of good spots we have.
Randy Selzer: Man, I’ve seen some big fish on that swimming up.So, I don’t know if they were salmon or … Humongous fish.
Roberto Pelaccia: Yeah, we get salmon running on up the Credit near the park. You can just stroll right in there. And pretty big pretty big salmon. Yeah. So, you know, that’s what we truly love to do. We love taking walks on the Port Credit and Streetsville. Some of our smaller little villages that we have in the city.
Randy Selzer: Yeah.
Roberto Pelaccia: So, those are probably some of our enjoyable things we like to do.
Randy Selzer: I bet your daughters love it when you take them fishing. They must just love that. They don’t have any problem touching a live fish or anything like that?
Roberto Pelaccia: No, they’re pretty good. No, they’re pretty into it. Yeah, I’ve slowly have got them trained that they can operate their own poles, and stuff.
Randy Selzer: Oh, yeah?
Roberto Pelaccia: So, we can actually all three of us fish at once.
Randy Selzer: Oh, that’s amazing. That’s amazing.
Roberto Pelaccia: So, they’re doing pretty good.
Randy Selzer: That’s great.
Roberto Pelaccia: Yeah.
Randy Selzer: What about restaurants? What’s your favorite restaurant off the top of your head, one of the favorite places to go to? Like Mississauga?
Roberto Pelaccia: My favorite restaurant is Alioli‘s. It’s right up Burnhamthorpe and Confederation.
Randy Selzer: Yes.
Roberto Pelaccia: It’s an Italian restaurant. Been there for-
Randy Selzer: I know it. They’re right on the corner of [crosstalk 00:18:44] National Bank, right?
Roberto Pelaccia: … probably 20 years.
Randy Selzer: Right on the corner there.
Roberto Pelaccia: That’s right.
Randy Selzer: Yeah.
Roberto Pelaccia: Exactly. They’re near all the Rodgers buildings.
Randy Selzer: Yes. Oh, yeah.
Roberto Pelaccia: All that stuff. So, a lot of development in the area, but that restaurant’s been there for awhile and it’s absolutely one of my favorites. We got engaged, me and my wife, at that restaurant.
Randy Selzer: No way.
Roberto Pelaccia: Yeah.
Randy Selzer: Really?
Roberto Pelaccia: So, we visit a lot.
Randy Selzer: In the restaurant? You popped the question?
Roberto Pelaccia: I did, yeah.
Randy Selzer: Oh, my God. That’s super romantic, man. Oh, my God.
Roberto Pelaccia: So, that’s our favorite restaurant.
Randy Selzer: I can see why. Anyways. That’s great, Roberto. So, thank you again for being on the podcast today. Roberto Pelaccia from Key Mortgage Partners. And it’s been a pleasure having this talk today. I hope we get to do it again sometime. And is there anything else you want to say or any other questions you have for me?
Roberto Pelaccia: Randy, I just wanted to thank you very much for the opportunity to speak today. I really appreciate it.
Randy Selzer: Oh, it’s my pleasure.
Roberto Pelaccia: And I look forward to working with you.
Randy Selzer: Thank you. And welcome again to my series of podcasts on business people in the city of Mississauga. It’s a pleasure having you. Thanks again.
Roberto Pelaccia: Thank you.
Randy Selzer: Bye now, folks.
