Mortgage Case

INSTRUCTIONS

- Complete all your work and record your answers. Work should include what your inputs were for your calculator

- Provide all answers to two decimal places.

1. Find a house that is for sale in the City of Edmonton that is listed on www.realtor.ca.

Price of the house: $384,990

2. Using the list price from the house you got approval on, what is the dollar amount of a five percent down payment?(1 mark)

384,990 * 0.05 = 19,249.50

384,990 19,249.50 = 365,740.50

3. What is your CMHC premium? (2 marks)

365,740.50 * 0.04 = 15,399.60

4. What is your mortgage amount? (2 marks)

365,740.50 + 15,399.60 = 381,140.10

5. You have decided that you are going to amortize your mortgage over 25 years. You were able to secure a five year fixed term mortgage for 5%. What is your mortgage payment? (2 marks)

6. Based on your answer from Question 5, answer the following:

a. How much interest did you pay with your first mortgage payment? (3 marks)

b. What will the mortgage balance be after five years? (3 marks)

c. How much total interest did you pay over the first five years of your mortgage? (3 marks)

7. Using the mortgage amount from Question 4, calculate your mortgage payment based on a stress tested mortgage rate of 7%. (2 marks)

8. Using your mortgage payment from Question 5, calculate your amortization period if your payments were:

a. Biweekly payments (3 marks)

b. Accelerated biweekly payments (3 marks)

***FIND PMT FIRST ,THEN SOLVE FOR N

SEMIBIWEEKLYACC. BIWEEKLY

P/Y 2426

C/Y 22

N

I/Y55

PV

PMT (DIVIDE THE ANS BY 2)

IN FINDING N, MAKE SURE TO MAKE PMT

NEGATIVE (-)

FV00

AMORT (N/PY)

9. Using the list value of your house and a mill rate of 8.6869, calculate:

a. The annual property tax bill (1 mark)

b. The monthly property tax (1 mark)

10. You take possession of the house on November 1^st.

a. What will the property tax adjustment be? (1 mark)

b. Who will have to pay the adjustment? (1 mark)

11. Based on the following:

- Gross annual income of $140,000

- Monthly heating costs of $300

- A monthly car payment of $650

- Your stress tested mortgage payment from Question 7

- Your monthly property tax from Question 9b

a. Calculate your GDS ratio as a percentage and state whether you would qualify for a mortgage where your bank requires your GDS ratio to be lower than 32%. (3 marks)

b. Calculate your TDS ratio as a percentage and state whether you would qualify for a mortgage where your bank requires your TDS ratio to be lower than 40% (3 marks)