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Life Situation: Megan and Sean are looking for their first home in Ontario. They are in their late 20s and have been married for three years. They still have a small amount left to pay towards their student and car loans. They do not have any children but plan to in the near future. Both Megan and Sean have steady stable jobs with good advancement opportunities. They are making housing savings. They do not want to use RRSP Home Buyers Plan for down payment.

Combined Gross Annual Salary

$75,000

After-tax salary

$60,000

Monthly Budget

Rent	800
Food	400
Entertainment	300
Clothing/Laundry	400
Telephone/Cable/Internet	200
Car loan payment	400
Car expenses	200
Insurance life, car	220
Insurance - apartment	30
Household	100
Student loan payment	300
Personal expenses	150
Miscellaneous	150
Savings	1,350*
Total	5,000

* Savings - usually each month they contribute $100 to their emergency savings, $300 to their RRSPs and $950 to their house savings

Net Worth

Assets		Liabilities
Chequing Account	1,500	Car	6,000**
Emergency Savings	6,000	Student Loans	8,000***
Car	14,000
RRSPs	15,000
House Savings	45,000
Total Assests	81,500	Net Worth	67,500

** They will be finished paying for the car loan in 16 months *** They will be finished paying for the student loans in 28 months

I already answered Question 1 which is

Suppose the couple uses CIBC. Research the current mortgage rates at CIBC and at a mortgage broker (your own selection). The rates quoted by the brokers are usually for fixed rate, closed mortgages. Fill in the table on the answer template with your information. You can adjust the table to reflect the information available from your source. You will not fill in every cell.

and my answer is: NOT SURE IF CORRECT, PLEASE CHECK AND CORRECT ME

-------------- however I need help with the following please:

Question 2a. What term would you suggest? why? what mortgage type do you think they should get? (fixed vs variable; open vs closed? why? .... what source they should use for mortgage? why?... refer to question 1 to state the source of the mortgage and at what rate:

Answer 2a in the following table:

	Recommendations	Why?
Length of Term?
Fixed or Variable?
Open or Closed?
Bank or broker?

Therefore, they should choose mortgage from (source) _____________ at (rate) _____________.

Question 2b. Suppose they have saved $41,000 for down payment. The price of the house they want to purchase is $225,000. What type of mortgage they are getting: conventional mortgage or high-ratio mortgage? why? Do they have to pay mortgage insurance premium? if yes, go to the CMHC website and use the calculator to calculate the premium. Assume a 25-year-amortization and monthly payment and use the chosen mortgage rate from previous 2a question:

Answer 2b in the following table:

	Your answer	Why?
Conventional mortgage or high-ratio mortgage?

Do they have to pay insurance premium for mortgage?	Yes or No	If Yes, write down the dollar amount; If No, write Not Applicable

Question 2c.

Answer 2c in the following table:

	TDS	GDS
Step 1
Step 2
Step 3
Affordable monthly mortgage payment
Step 4 mortgage rate to use here: ____ % Amortization 25 years.
Affordable Mortgage amount
Step 5
Affordable home purchase price

Therefore, they should buy a house priced $ ___________ or less.

6 1 4 Mortgage Type 2 yr 3 yr 5 yr 7 yr 10 yr mos yr yr NA 3:2 2.9 3.7 4.3 4.9 6 6.19 Fixed rate - closed Fixed rate-open 7.25 6.4 NA NA NA NA NA NA NA NA NA 2.5 NA 2.5 NA NA Variable - closed Variable - open NA | | NA 4.3 NA NA Variable - capped NA NA NA NA NA NA NA NA Broker: 4 10 Mortgage Type 6 mos 1 yr 2 yr 3 yr ES yr yr 3.2 2.9 3.7 4.3 4.96 6.19 Fixed rate - closed NA NA NA 2.5 NA 2.5 NANA Variable interest rate Use Text p233 Exhibit 7-7 'Housing Affordability and Mortgage Qualification Amounts' to calculate the affordable home purchase price. Below is some extra info: Step 3: monthly housing expenses or costs (insurance, taxes, heating, etc.) are $440. Step 4: according to new government regulations - the so-called stress test, borrowers must qualify based on an interest rate equivalent to the higher between the two the chosen rate from Q2 and Bank of Canada 5-year posted fixed rate (currently 4.94%). Whichever greater is called 'qualify rate. Based on the qualify rate, find the factor to be used in the division calculation of Step 4. When qualify rate >-4%, refer to Text p234 Exhibit 7-8 "Mortgage Payment Factors! Otherwise, use the attached chart below. If your qualify rate is not listed, use the closest rate to find the factor. For example, if your qualify rate=6.3%, use the factor corresponding to 6.5%. Assume a 25-year amortization. Step 5 divide by 0.817. Calculate the affordable home purchase price using both the GDS and TDS ratios. The final answer of the affordable price will be the lower of the two. 6 1 4 Mortgage Type 2 yr 3 yr 5 yr 7 yr 10 yr mos yr yr NA 3:2 2.9 3.7 4.3 4.9 6 6.19 Fixed rate - closed Fixed rate-open 7.25 6.4 NA NA NA NA NA NA NA NA NA 2.5 NA 2.5 NA NA Variable - closed Variable - open NA | | NA 4.3 NA NA Variable - capped NA NA NA NA NA NA NA NA Broker: 4 10 Mortgage Type 6 mos 1 yr 2 yr 3 yr ES yr yr 3.2 2.9 3.7 4.3 4.96 6.19 Fixed rate - closed NA NA NA 2.5 NA 2.5 NANA Variable interest rate Use Text p233 Exhibit 7-7 'Housing Affordability and Mortgage Qualification Amounts' to calculate the affordable home purchase price. Below is some extra info: Step 3: monthly housing expenses or costs (insurance, taxes, heating, etc.) are $440. Step 4: according to new government regulations - the so-called stress test, borrowers must qualify based on an interest rate equivalent to the higher between the two the chosen rate from Q2 and Bank of Canada 5-year posted fixed rate (currently 4.94%). Whichever greater is called 'qualify rate. Based on the qualify rate, find the factor to be used in the division calculation of Step 4. When qualify rate >-4%, refer to Text p234 Exhibit 7-8 "Mortgage Payment Factors! Otherwise, use the attached chart below. If your qualify rate is not listed, use the closest rate to find the factor. For example, if your qualify rate=6.3%, use the factor corresponding to 6.5%. Assume a 25-year amortization. Step 5 divide by 0.817. Calculate the affordable home purchase price using both the GDS and TDS ratios. The final answer of the affordable price will be the lower of the two

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