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  • Is the Pre-approval System Flawed

  • This Wednesday I will be meeting with existing clients who are blessed to have a beautiful family. When I first met this professional couple, we laid out a nice plan to pay down the mortgage and still enjoy life. At Robert Floris’s Mortgage Architects office we will try to explain how the current system to pre-approve clients is terribly flawed. As home prices have increased with the low mortgage rates it has put another strain on young Canadian families.
    The couple who are coming this week have two healthy children. I still remember falling over my chair when I heard they were paying over $2000 per month for daycare. Needless to say they were stressed. We threw out the old plan to pay the mortgage quicker and refinanced them at 30 years. When the kids start going to school their daycare costs will be greatly reduced and we can re-think how to meet their new home goals.
    We take great pride in pre-approving clients. We calmly explain the process, make them do a budget and have the parents assist on what to be aware of. Although we have enjoyed some modest success with clients, many clients’ original plans have changed during the ownership years.
    In the past five years mortgage rates have come down but when we interview them years later three major factors have affected their household finances:
    1. Children
    2. Cars
    3. Home Repairs
    It made me think, the current pre-approval process is flawed. It does not account for life. By that I mean it is not flexible. Your pre-approval life and home life with kids are two separate worlds. If I can figure this out, why is there not a better system to help Canadians enjoy a better financial future.
    Either the big banks do not realize this (I doubt it) or they want purchasers depended on them and paying interest for a long time. Going forward I will take the initiative to incorporate these life numbers in their pre-approval.

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