You are a financial advisor for a local bank, and you have several credit appointments today with different clients. Some of the appointments involve clients looking to apply for a credit product and some have questions regarding an existing credit product that they have.

Be sure to read through each question carefully and answer each question in full. Consider each client scenario to be separate from the other scenarios, meaning, information for one client will not be the same for another client.

Scenario #1 Jeff is applying for a $5,000 credit card. It will be his first credit card and he is applying for it to start building credit for the future. Assume the interest rate for the card will be 19.99%. With Jeff, please discuss the following: (8 marks)

a) What it means that a credit card is a revolving credit product

b) Explain two benefits and two costs of a credit card

c) Explain the grace period for credit cards.

d) Calculate the amount of interest that will be added to his credit card after the payment date if the balance owing on his statement showed $4,250 for the month of July and he only makes a $300 payment.

Scenario #2 Trent is applying for a $35,000 consolidation loan and has recently experienced some credit issues. With Trent, please discuss the following: (10 marks)

a) List and define the 5 + 1 Cs of credit (5 are listed in the textbook and 1 we added in class). (6 marks)

b) You access Trents credit score and find that his score is 643. Explain to Trent three factors that could influence his credit score and tell him what the desired credit score is for a loan application. (4 marks)

Scenario #3 Amy is looking to buy a car and has come to you to do a car loan application. She is considering going through a dealership but thought she would come speak with you first. After doing the application, she has been approved for a $32,000 loan with a monthly payment of $575. Please discuss the following with Amy: (10 marks)

a) Explain an advantage and disadvantage of obtaining financing for a car purchased between going through a bank versus a dealership. (4 marks)

b) Calculate her pre-loan and post-loan TDS if her gross income is $7,450 per month, she has $3,500 in her savings account, her mortgage payment is $1,550 per month, her property taxes are $225 per month, her heating payments are $150 per month, she has a student loan with payments of $115 per month, a personal loan with a $300 per month payment, and she spends $400 per month on groceries. (4 marks)

c) Based on TDS, does she have the capacity to qualify for the car loan and why? (2 marks)

Scenario #4 The Montgomerys are wanting to borrow money for a vacation but are unsure what type of credit product they should apply for. Please explain the following to the Montgomerys: (8 marks)

a) Explain three differences between a loan versus a line of credit. (6 marks)

b) Explain the difference between a fixed versus variable rate. (2 marks)

Scenario #5 The Hernandezs are looking to buy their first home. They have come to you for a mortgage pre-approval. Please discuss the following with the Hernandezs. (13 marks)

a) Calculate the largest mortgage payment (principal and interest) that they can afford based on TDS. They have a combined income of $9,500 from their regular jobs and earn $500 per month from a side hustle, $25,000 in savings, $775 per month in debt payments, and spend $1,000 per month on personal items like groceries and gas. They expect the home they buy to cost approximately $150 per month for heating costs and $275 per month for property taxes. (3 marks)

b) Calculate the approximate mortgage amount based on the payment amount you calculated in a. Assume they are doing a 20-year amortization and the term rate for the application will be 4.5% interest rate. Dont worry about CMHC fees yet. (2 marks)

c) Calculate the approximate purchase price if they can do a 15% down payment. Dont worry about CMHC fees yet. (2 marks)

d) Explain what CMHC fees are and tell them how much they could expect to be added to the total of their mortgage in CMHC fees if they put 15% down. (3 marks)

e) List and describe the three ways that the Hernandezs could pay property taxes for their home (3 marks)

Scenario #6 The Singhs are looking to refinance their house to do some renovations. The current appraised value of their home is $575,000 and they have a $245,000 mortgage currently on it. Please discuss the following with the Singhs. (8 marks)

a) Calculate the maximum amount that they could borrow against their home in a refinance and calculate the amount they are eligible to borrow. (3 marks)

b) Calculate the amount that they could borrow as a Home Equity Line of Credit (HELOC) if the full amount owing on their house were in a HELOC (2 marks)

c) Based on your calculations, are they eligible to add a HELOC with their existing mortgage? (1 mark)

d) Explain one advantage and one disadvantage to refinancing with a HELOC (2 marks)