Jose and Maria Dias bought their first home in Milton, Ontario, two years ago. The purchase price was

$$500,000.$ They were determined to get a conventional mortgage and were able to come up with a down

payment of $$100,000$ by combining savings of $$30,000.$ and borrowing $$35,000$ from their RRSPs each.

They were approved for a $3\mathrm{.}5$ percent $25-$year mortgage for $$400,000$ with monthly payments of

$$1,997\mathrm{.}07.$ In addition, they chose to pay the lender another $$400$ per month for property taxes.

So far everything has been going well. They both have good jobs. Jose makes $$69,000$ a year and has a

monthly take$-$home pay of $$4,025.$ Maria earns $$35,000$ and has a take$-$home pay of monthly $$2,175.$

They have no credit card debts but pay $$700$ per month for an auto loan and RRSP loan repayment.

Other monthly expenses are as follows: home insurance $$60.$ auto insurance $$200.$ utilities are $$450$

$($$$250$ is for heating$/$hydro$),$ and food is $$700.$ and transportation $$350.$ What is left is either used for

entertainment or put into a savings account.

Maria is now six months pregnant with the couple's first child and she is worried about whether they

will be able to meet their living and financial expenses while she is on maternity leave. She is also

wondering whether, in the event her mother is unable to look after the child, they can afford monthly

childcare expenses of $$600$ or more for the baby when Maria returns to work.

Questions

a$)$ While on maternity leave. Maria will receive only $55$ percent of her salary. Taking this and

some of the additional baby costs $($such as diapers and formula$)$ into account, will the Diases

be able to make ends meet? $5$ Marks

b$)$ Will they be eligible for any tax credits and benefits that would increase their cash inflow? $5$ Marks

c$)$ Are there any expenses they can reduce to help meet their obligations? $5$ Marks

Insurance $-$ Home and Automobile Insurance