Q) The Simpsons are first time home buyers. They have negotiated a fixed rate of 3%, compounded semi-annually, on a $325,000 mortgage loan to be amortized over 25 years. The Bank of Canada posted 5 year rate is currently 5.34%. The Simpsons expect that monthly municipal taxes and heating costs will amount to $300 and $150, respectively. Their only other debt is a $10,000 line of credit which they have yet to use. The couples gross combined income is $115,000.

They will make monthly mortgage payments. Note that mortgage lenders assume a minimum (usually 3%) payment on a credit card balance and line of credit balance based on full usage.

Part a)

Keeping in mind the mortgage stress test for new home buyers, what will be the couples TDS ratio? Will they qualify for the mortgage loan?

Part b)

The couple will make a $50,000 down payment on the loan. How much additional interest would they pay over the life of the loan if they add the CMHC mortgage default insurance cost to their mortgage?

Part c)

If the couple opts for an accelerated bi-weekly payment (i.e. a payment every two weeks that equals of the regular monthly payment), what would be their new amortization period?

TABLE A

2018 Combined Federal and Quebec Personal Income Tax Brackets and Tax Rates
2018 Taxable Income	2018 Tax Rates	2018 Taxable Income	2018 Tax Rates
first $43,055	27.53%	over $93,208 up to $104,765	45.71%
over $43,055 up to $46,605	32.53%	over $104,765 up to $144,489	47.46%
over $46,605 up to $86,105	37.12%	over $144,489 up to $205,842	49.97%
over $86,105 up to $93,208	41.12%	over $205,842	53.31%

TABLE B

Tax-Free Savings Account (TFSA) Annual Limits
Year	Annual Limit	Year	Annual Limit
Year started 2009	$5,000	2014	$5,500
2010	$5,000	2015	$10,000
2011	$5,000	2016	$5,500
2012	$5,000	2017	$5,500
2013	$5,500	2018	$5,500