Scenario B

Phil and Pamela are looking to buy their first home. It has been tough in this market but the pressure is on because they are expecting a baby in 8 months! Phil works as an engineer for a private firm and earns $120,000 per annum. His job is quite secure and he hopes to progress in the company and earn more in the future.

Pamela is still finishing up school as she came here from overseas and needs to upgrade her education to find her dream job as a school teacher. She has another 2 years left, which may take a little longer now that they are expecting a baby. She used to work part-time earning $30,000 a year. Her job was not secure and was out of work during the pandemic. She is looking for another part-time position now.

They live in a basement apartment and are cash flow positive having a surplus of $300 a month. Unfortunately they dont have too much financial support, except for the possibility of a loan from a friend.

They have been pre-approved for a mortgage of $1,000,000 and have been given the following options:

Open, variable. One year term 4.50%

Closed, variable. One year term 1.65%

Closed, fixed. One year term 2.79%

Closed, fixed. 3 year term 2.29%

Closed, fixed. 5 year term 1.85%

Required:

Which of the mortgage options would you recommend based on the information provided? Explain why this is the most suitable option in your opinion citing facts to support your argument from the information provided.