Francois and Marielle Sheppelle are in their mid-fifties. Both are elementary school teachers and are close to retirement. Francois's annual salary is $125,000, and Marielle's is $105,000. They have excellent credit and pay off their credit card balances each month. The credit bureau you have printed off is very good for each client, showing no late payments and all accounts are up to date. They have two adult children; one is attending university, and the other has graduated from university and recently moved out. The couple finds they have more leisure time and have been considering buying a condo in Las Vegas as a wintering property. They have just returned from a trip to Vegas, where they met with a local realtor, and they have a couple of properties in mind. They would like to talk to you about pulling equity from their home to make the purchase because they know they cannot get a standard mortgage in another country. Their home has been paid off for the last five years. 

The Sheppelle's Updated Net Worth Statement

 

ASSETS	BALANCE	LIABILITIES	BALANCE	PAYMENT
HOME	$450,000.00	TD VISA ($10,000 LIMIT)	0	0
Joint Accounts	$18,500.00	BMO MCD ($5,000 LIMIT)	0	0
CIBC RRSP	$55,800.00
MANULIFE RRSP	$75,853.00
SUNLIFE INVESTMENTS	$35,000.00
TOTAL ASSETS	$635,153.00	TOTAL LIABILITIES	0
NET WORTH	$635,153.00

Instructions: Please use the above case narrative to help you complete the HELOC case, you will find your word documents below. Follow the instructions to upload into Moodle.

Home Equity Line of Credit Case:

 

1.  Calculate the maximum equity amount the clients can have:

 

2.  What additional costs may the clients pay if they complete a HELOC on their property?

3.  What documentation do you, the lender, require of the customer?

 4.  Calculate the payment of $250,000 using the 5-year qualifying rate of 4.75% at a 25-year amortization to calculate TDS. Use the stress test.

 

5. Francois and Marielle ask why you are calculating the payment as a regular mortgage payment, not the required interest payment. Explain why you need to calculate the payment in this manner.