Pre-approvals are certainly beneficial. However, they can also be very disappointing if you are not prepared to know what they actually mean.

They DON’T mean…

They don’t mean that you have a mortgage.Until there is a Purchase Agreement (a written up contract to purchase a property) actually submitted to a bank and a commitment from the bank offered to the client, there is no mortgage. Your bank will often say, “You are pre-approved on a mortgage based on a specific rate that is being offered during this time.” Factors such as the amount of income you bring in, the amount of debt you have and even the property itself will determine whether or not the bank will actually give you a mortgage.

They don’t mean that the rate you are pre-approved for will be the rate you pay. Rate holds are temporary and depending on whether or not you qualify for the rate, you may not get what you initially bargained for.

To get a pre-approval that is solid it is important to know exactly what the terms of the pre-approval mortgage are. Pre-approvals should show exactly what you qualify for in terms of how much money you will be able to borrow for a mortgage based on your financial profile.

A good pre-approval…

A good pre-approval will reflect that you properly income qualify. As mentioned previously, many banks will give you a pre-approval based on a rate guarantee, NOT ON YOUR INCOME. This means that you may be in a lurch because the bank has not pre-approved you properly. A good pre-approval will be based on asking for documents to prove your income. The last thing you want is to be “pre-approved” only to be told after you’ve made an offer on a property that you actually don’t qualify.

A good pre-approval will let you know how much money you will need to provide for a down payment along with closing costs. There are more costs involved in purchasing a property than just the down payment. Costs such as legal costs, title transfer costs, property transfer tax costs (if applicable), appraisal costs (if applicable), etc. are often not talked about when initially going to your bank to ask for a mortgage loan.

A good pre-approval will secure a rate for 90 to 120 days. If rates are trending down, even when you have a negotiated pre-approval rate, you should be able to take advantage of the lower rate. Pre-approvals are excellent when rates are trending up. They secure the lowest rate, even when the bank has raised their rates. But be careful! Every bank has their own guidelines as to guaranteed rates and whether or not they will commit to the lower rate they initially negotiated with you.

A good pre-approval will be aware of lender guidelines concerning properties. Appraisals are not done for a pre-approval. But when contracting for a mortgage, depending on amount of down payment, contract details, etc. you may have to have one. The lender and the insurer ultimately look at the property to see if they deem it marketable and low risk for resale.

A good pre-approval gives the Realtor sure negotiating power. In today’s market there are properties selling so fast that financing has to be secured before going in to make an offer. A good pre-approval ensures that your chances of getting an accepted offer on a popular property are sure. Taking part of a multi-offer negotiation increases your opportunities for success, which can only be the result of a firm pre-approval.

A good pre-approval will prepare you for what you should expect your monthly mortgage spending budget to look like. With your pre-approval in place you know what kind of payments to expect, including the amount of taxes, strata fees (if applicable), etc. you will likely be paying. Your pre-approval explores the costs involved in purchasing a property and carrying a mortgage.

Courtesy of Geoff Lee, AMP – DLC GLM Mortgage Group 

So you’ve graduated from high school and off to university or college. Before you start, take the time to set down some goals and a budget for your financial future as a post secondary student.

Your parents have probably been telling you to put aside some money from your part time job into savings. However, sometimes we don’t take the advice of our parents  So if you aren’t sure you are on track with your budget and savings, consider a few pointers that I have always found helpful and some from the experts provided in the links below.

To help with your financial future as a post secondary student here are a few easy steps you can set up a budget to live by including a savings plan:

1. Track your spending for 2-4 weeks. It depends on how disciplined you are but if you can track for the full month –all the better. Some expenses like gas for your car will be easy. It is the little trips for coffee that we sometimes forget and those can add up.

2. Make a chart or list of your expenses (all spending) and income. If you are spending more than you are earning you need to make some adjustments. You should not be dipping into savings to cover your monthly expenses. If you are earning more than you are spending — excellent!

3. Based on your budget, set an amount each month that goes into your savings account. I recommend 10% of your income. If you are living at home while going to school you may be able to set aside more in savings. Take advantage of that low or no rent situation!

4. Talk to friends and family to see who they use for investing their savings. You may be conservative or more aggressive — that is up to you to decide or to discuss with a financial planner. Set aside some money for short term needs and for a long term savings. You may have a goal to save $1,000 for new tires for your car and then accumulate a larger savings goal that you build on over the next 4 years of school to use towards moving out of the family home, buying a new car or a down payment on starting a business.

For more tips visit—

http://www.mymoneycoach.ca/impulse_spending/education.html

To learn more about common challenges for post secondary students, visit –

Five financial pitfalls that post-secondary students should avoid

Courtesy of Pauline Tonkin, AMP – DLC #Innovative Mortgage Solutions

In today’s market, variable and fixed rates are not too far apart. This makes most people think that the fixed rate is the way to go as it’s often viewed as the safest option.

Many believe that variable rate mortgages are for the daring and at any time your rate could double leaving you high and dry in the cash flow department. Many don’t realize that isn’t the truth at all.

The great thing about a variable rate is you have the option to lock into a fixed rate at any time you start feeling panicky, but I can assure you your interest rate will not be doubling over night. Even if your rate did go up by .25% the savings you would have already earned would put you on level playing ground, or you’d possibly still be in the lead.

Over the last 40 years variable rate mortgages have proven themselves to be the better choice for saving money and flexibility. I would also say that you’ll be given ample warning in the news and media that the Bank of Canada is planning a move on rates. When the rate does increase, I’m certain it will be slowly creeping up with just a quarterly rate increase at a time.

Where you’ll save the most money choosing a variable rate compared to a fixed rate is with the penalty.

With a variable rate, you’ll only ever be charged 3 months interest at any given time you choose to break your mortgage during the term. With a fixed rate it’s always the greater of Interest Rate Differential (IRD) or 3 months interest, and believe me those IRD penalties can be insanely large!

Statistics show that the majority of Canadians break their mortgage before the 5 year term is up, so save yourself some dough and consider going variable. There’s more to it than just the lower rate…and we here at Dominion Lending Centres can show you many mortgage options to fit your specific needs.

Courtesy of Danielle Spitters, AMP – DLC Valley Financial Specialists 

When I meet with my clients, I explain that I believe my role is to get them the mortgage that fits their goals and plans, while saving them the most amount of money over the lifetime of their mortgage. This takes into consideration what you might be offered at renewal time by the lender or should you terminate the mortgage during the term or what will you pay for an early payout penalty.

In the last few weeks the feds have increased the posted rates (aka, contract rate) at the big 5 banks, was 4.54% and now at 4.74%. Why does this matter to you??…qualifying and early payout penalties!

Qualifying……. If you want a variable rate mortgage or a term shorter than 5 years, we have to use the “posted or contract rate” (4.74%) to qualify you for the mortgage. This recent bank rate increase means fewer clients will have the option of choosing a variable rate or shorter term mortgage. The 5 year fixed rate becomes their only option.

Early payout penalty……With the 5 year fixed rate seriously low at 2.44% for an insured mortgage, that might not seem like a bad deal. Unless you have to break or terminate that big bank mortgage before the end of the term. The big banks calculate the early payout penalty by adding back the discount you got when you selected the mortgage term with them. It is as if you are paying them the posted rate, when it comes time to calculate the early pay out penalty. (e.g. Posted rate 4.74% – your rate 2.59% = your discount of 2.15%). With this new increase in the posted rate, it means your penalty will be higher should you break or terminate your mortgage before the maturity date.

In an economy where interest rates are decreasing, by increasing the posted rate the big banks have found another way to make money off of you, the borrower, that is not in your best interest!

When you are mortgage shopping for a purchase, refinance or a renewal, please talk to an experienced and knowledgeable Dominion Lending Centres mortgage professional. When life happens and the penalty is $3,500 vs. $16,000 you will be happy you followed our advice.

Courtesy of Karen Boies, AMP – DLC Citywide Mortgage Services 

Knowledge is power! With education comes limitless possibilities.

Are our kids learning the essentials in life? Are they being empowered to make life-changing decisions when they enter into the real world of economics?

The education that most kids in senior secondary school receive these days focuses on biology, math, physics, chemistry, English, physical education, social studies, mechanics, wood-working and home economics, not real life!

What about personal finance? We need to teach our kids about everyday economics.

Most people remember when they got their first credit card. What a disaster that was (for some people). If we aren’t taught about how to use credit, it can quickly get out of hand. Most people think that if they have a $1,000 limit all is good as long as they don’t exceed the limit —FALSE! Credit scores strengthen and increase if balances are at or less than 30% of the limit. There you go, you may have just learned something. What are most teenagers more concerned with, the growth of one’s mutual fund or the latest and greatest Apple product.

Why not educate our kids about credit, day-to-day banking, mortgage financing, stocks, mutual funds etc… before leaving the protective confines of the International Bank of Mom and Dad. 

My entire mortgage practice is based solely on information and education — just look at the title of this blog. ALL of my clients are provided options in order for them to make an informed choice. I encourage all my clients to ask as many questions as possible, if there are unanswered questions then I am not doing my job correctly.

It’s never too late to learn. The brain is a muscle that constantly needs exercise and craves new data. Keep feeding it. Ask questions, even if the answer seems obvious. Maybe the person answering will put a slightly different twist on the topic and reveal something new to you. This business I’m involved in yield new information on a daily basis, I thrive on it and it’s a necessity of survival.

Education is a priority for me, it should be for you too!

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AMAZING STATS ABOUT LEARNING

• 25% of children starting kindergarten in Canada lack the skills needed to learn how to read.
• Every time 350,000 Canadians learn to read, our GDP goes up by $32 billion (i.e., a 1% increase in the nation’s literacy rate translates into a 2.5% GDP increase).
• On average, Google processes over 40,000 search queries every second, over 3.5 billion searches per day and 1.2 trillion searches per year worldwide… whatever it may be, we are always learning.