A while back Dan and I made an appointment at a bank to chat with someone about mortgages. This was in no way a pre-approval, since we still won’t know the final numbers for Dan’s income this year until December 31. On one of my many stops into TD bank for work one week, I asked about making an appointment to sit down and talk to someone, you know, ask questions and hopefully not be laughed out of the building. I made sure to specify that this meeting was not a pre-approval, in case they had funny ideas about locking a nice young couple into a 25 year mortgage before we wanted to do that. I don’t have a chequing account with TD and neither does Dan, but I had one for many years and closed it in favour of a FREE account from PC Financial (you hearing this TD? Free wins when it comes to chequing). I do have an RRSP with TD, which I started almost two years ago when I started my big-girl job. I figured this would be a safe place to start since this bank kind of knew me.
Before I get into the details of our meeting, I thought I would mentioned why we decided not to even look at a mortgage with PC. We both have chequing and saving accounts with PC, which are easy to manage through the online-only system. I’ve never had any trouble getting what I need from PC, but I recognize where they fall short. You cannot go into a branch to talk to someone – there’s no such thing as a PC branch. While PC operates under CIBC (I regularly deposit cheques and get cash out from CIBC ATMs), you cannot go into a CIBC branch and hope to speak with someone about your PC account. This is the price you pay for “free” banking. I’ve never had a mortgage before, and I’m not interested in learning the ins and outs of this process on my own and with someone over the phone only. I need to sit down in a bare little bank office and chat it out with a person in front of me. PC may offer reasonable rates for mortgage, but they’ve lost me on the personal touch and accountability of having a real person attached to my account.
I like TD because they have longer hours, and I like that this fits better with my irregular schedule. I made our appointment for 4pm on a Tuesday and I didn’t have to feel like I was holding someone up from getting home by 5. The representative we met with was Ryan, I had never met him before but he was friendly and helpful. In setting up my RRSP at TD, I had been working with someone named Wanda, but when I inquired about having a meeting with her since she was someone I knew, I was told she moved on to a different branch. That’s one of the problems with banks, and TD in particular in my experience. At my family’s business, we have a TD account for small business and our small business rep has changed almost every year since we open the account 10 years ago. While we’re getting “personal” service from someone sitting in front of me, I’m not naive enough to believe that the same smiling face will be the one to greet me every time I sit down to renegotiate the mortgage over the next 25 years.
When I made the appointment, I got a handy-dandy check list of things to bring with us so Ryan could show us real numbers. The list included financial statements (T4s or income statements from employers, or in Dan’s case, TD required two years of financials since he’s self-employed), lists of any debts or loans, lists other income (RRSPs, stocks, etc), and your current expenses for your home. We independently gathered our pile of financials and brought it all to the meeting. My pile included:
-My 2010 tax evaluation, which stated my income. I forgot to bring my 2010 T4, but the tax form had the same information.
-Most recent bank statement, which included a month of typical spending in my chequing account, as well as the current balances in my chequing, joint account, and savings accounts
-Most recent credit card statements from my Visa and Mastercard bills – I’ve never carried a balance on either card, but I figured this could count as debt
-The documentation to prove that my 2008 car loan had been fully paid off and the loan closed
-I did not bring any of the paperwork for my RRSP since TD had all of the information available to them
Dan brought similar documents, including his 2010 financial information for his business, and a best-guess for his 2011 income based on work he had already invoiced for during the year and bookings for upcoming work in December. At our meeting, we had about a month left in Dan’s business year and we knew that the bank wouldn’t play real numbers with hypothetical numbers, even if they wouldn’t be changing.
The meeting started with a few of our biggest questions, like what kind of difficulties will we have getting a mortgage when Dan is self-employed. We went into the meeting assuming we would need to get a co-signer, but Ryan told us that won’t necessarily be the case. At TD, if you are self-employed, they take your two most recent years and average your income. In Dan’s case, with a very sad first year, this brings down his average.
In order to answer some of our questions, Ryan needed to get a sense of our numbers. He calculated my personal net worth, based on my income, assets, and liabilities. He never did Dan’s, and I’m not sure if this was because Dan’s couldn’t be done since he didn’t have two years of financials yet, or if Ryan just moved on to the next step. We ran through all of our monthly expenses that we are currently paying, stressing to Ryan that we are not interested in paying more than we currently pay each month for life. We don’t want to be house-poor, and it’s more important to us to have money available each month for spending on life than it is to pay down our mortgage as fast as possible. Don’t get me wrong, we live cheap. We budget and plan for expenses, we plan our meals each week and shop accordingly, and we’re savers not spenders. I rattled off all of the regular monthly expenses for Ryan, being careful to note what is a shared household expense, and what is a personal expense for each of us. For example, we both have our own cell phones which we budget and pay for on our own, and we don’t have a shared home phone. Ryan came up with a final monthly figure and used this to establish how much mortgage we can comfortably afford.
His monthly expense amount included rent, tenant’s insurance, heat, hydro, water, internet, and groceries. No car expenses were included since we both pay for cars with our own money. We share all joint expenses, but my money is my money, and Dan’s is Dan’s. Ryan’s budgeting figures to calculate our theoretical mortgage seemed to be based on this whole amount (rent plus everything else we pay for in a month) rather than just what we are paying in rent (which would be equivalent to mortgage). This didn’t make sense to me, and still doesn’t, but he also showed us mortgage estimates that I feel are way above what we could really afford. We’re not going for the biggest possible house we can afford – there are two of us, and will only ever be two of us. Beyond a certain price point, you’re getting bigger houses, not just nicer houses, and we don’t need that.
Despite this confusion, from our meeting we determined we should be able to afford enough for a house we really want, instead of a house we thought we’d have to settle for. Our initial estimates (based on online mortgage calculators and pure guesswork) were a little low compared to what Ryan tells us is possible. This little bit of extra wiggle room opens up more possibilities, and Dan’s constant MLS hunting has broaden to include areas we didn’t think we could afford. This is all in theoretical money and mortgages though, since Ryan and any other money lender can’t guarantee any interest rates until they actually pre-approve you and do a credit check. We’re optimistic about our options, and we’ll be looking seriously in the new year. TD may not be our final choice for our mortgage, but they were a big help in setting the record straight and answering our first questions.