Mini-Case

Like every Canadian couple, Monir and Jackie carry quite a lot of debt, despite their high income. Both lease their cars at a combined cost of $2,300 a month. Their recently-built house carries a $1,000,000 mortgage at a rate of 2.4%, 5-year term, with monthly payments over 25 years. Theirs was not a conventional mortgage, but a high-ratio mortgage at a 90% loan-to-value ratio. Other monthly debt charges (line of credit, credit card, etc.) amount to $5,000 a month. Municipal taxes and heating costs amount to $900 a month. They were First Time Home Buyers.

part a)

The couple chose to add the CMHC mortgage loan insurance to their $1,000,000 fixed rate mortgage. However, had they paid the insurance off up-front, how much total interest would they have saved over 25 years?

Mortgage Insurance Calculation

Part b)

The couple drew down $80,000 from their RRSPs on July 15 of 2021 under the Home Buyers Plan (Monir had been an employee in a prior career and had made contributions). Identify 4 requirements they would have had to meet to qualify for the HBP.

HBP Criteria

Part c)

What is the couples Total Debt Service Ratio (TDS)? Ignore Monirs capital gains/losses.

Calculation of mortgage payment (rounded to nearest dollar)

Calculation of TDS

Part d)

Monir drives a Range Rover that, at the time of signing of the lease, sold for $125,000. Assuming Monir made a $5,000 down payment. Other than a low down payment, identify two advantages of leasing versus purchasing a car.

Advantages of Leasing versus Purchasing

Appendices

2020 Combined Federal and Quebec Personal Income Tax Brackets and Tax Rates
2020 Taxable Income	2020 Tax Rates	2020 Taxable Income	2020 Tax Rates
first $44,545	27.53%	over $97,069 up to $108,390	45.71%
over $44,545 up to $48,535	32.53%	over $108,390 up to $150,473	47.46%
over $48,535 up to $89,080	37.12%	over $150,473 up to $214,368	50.15%
over $89,080 up to $97,069	41.12%	over $214,368	53.31%

2020 Federal Basic Personal Amount and Quebec Basic Personal Amount
2020 Federal Basic Personal Amount	2020 Quebec Basic Personal Amount
$13,229	$15,532
Tax rate 15%	Tax rate 15%

Tax-Free Savings Account (TFSA): Annual Limits
Years	Annual Limit	Years	Annual Limit
Year started 2009 - 2012	$5,000/year	2016 - 2018	$5,500/year
2013 - 2014	$5,500/year	2019 - 2020	$6,000/year
2015	$10,000/year	2021	$6,000/year

Registered Retirement Savings Plan (RRSP): Annual Limits Formula for RRSP contribution limit: 18% of your previous year's earned income less your previous year's pension adjustment to an annual maximum.
Year	Annual maximum contribution limit
2018	$26,230
2019	$26,500
2020	$27,230
2021	$27,830

Home Buyers Plan (HBP)
Withdrawals made after March 19, 2019	Withdrawals made prior to March 19, 2019
Withdraw up to $35,000 per borrower and up to $70,000 per couple. 15 years to pay back the amount withdrawn	Withdraw up to $25,000 per borrower and up to $50,000 per couple. 15 years to pay back the amount withdrawn