Exam 2: Managing Your Financial Resources - Purchasing and Financing a Home

Indicate your assumptions and calculations and comment on whether buying versus renting would make more sense in the following scenario.The couple each grosses $4000 monthly income.They have $40000 saved for the house purchase and are currently renting a two bedroom aChapterment for $1500 a month.They want to purchase a two bedroom condo for $300000 ,which has monthly expenses as follows: property tax $220,heat $100,and condo fees $350.Consider closing costs,cash flow and other calculations to justify whether you recommend they buy,or not.

A variable-rate mortgage starts with higher payments,which decrease as the mortgage is paid off.

The total household income available is $4032.Mortgage payments including taxes,principal,and interest are $1174.In addition,there are condo fees of $150,heating costs of $65 monthly,a student loan payment of $100 and a car lease of $141.What is the total debt service ratio?

To speed up the home-buying process,you should first give a verbal offer to see if the seller is willing to accept the price you are willing to offer.

If you have a lot of debt such as a car loan,student loan,line of credit and credit card balances which you carry from month to month,which will be most relevant in determining how much mortgage you can afford?

Why is a conventional mortgage a good idea for a buyer?

In addition to closing costs,realtor fees of three to seven percent are charged when you buy a home.

Mertyl is interested in buying a house worth $335 000 and has a down payment of $40000 .CMHC charges the following rates on the loan to value ratio: Up to and including 80 percent,2.40 percent; up to 85 percent,2.80 percent; up to 90 percent,3.10 percent; up to 95 percent 4.00 percent.What will be the CMHC insurance premium?

What is the most significant cause for concern in selecting a variable-rate mortgage?

Paying off an existing mortgage with a new mortgage that has a lower interest rate is referred to as

Which of the following is true about condominiums?

What is the most important factor in determining the price of a home?

Which of the following options regarding a $200000 mortgage,compounded semi-annually requires the lowest total interest payment?

Illustrate how GDS and TDS ratios as well as cash flow are important in calculating what size mortgage a person can afford.Use the following example to illustrate your conclusion. Hannah earns an annual salary of $72 000 and has following monthly expenses. Hannah has $31 000 saved in her RRSP.There is a new condo development going up in her area and she hopes to be able to purchase her own place.The unit she has her heart set on costs $310 000 and they advertise a mortgage rate of 3.5%,compounded semi-annually,for this development.The property taxes will be $170 per month,heating costs $80,and condo fees $300.

What is the purpose of getting a pre-approval certificate from a financial institution?

If Jane had a total of $30 000 available for the purchase and transactions expenses to buy a condo,and an accepted offer of $150 000 for the property,she would be able to get a conventional mortgage.

Which would be the best mortgage option if you anticipate a windfall in the next year or two?

The maximum amortization period for a high ratio mortgage is 25 years.

The interest you would pay on a $200 000 mortgage,amortized over 25 years,with an interest rate of six percent compounded semi-annually,would be $300 000.

If the average price of homes you are considering went from $300 000 to $330 000 last year,it would make sense to estimate that they should be worth around $439 000 in three more years.