Question 1

Mortgage companies usually charge interest semi-annually.What would be the effective rate of interest on a mortgage at 8.25 percent compounded semi-annually?

Accepted Answer

A)  8) 56 percent
B)  8) 42 percent
C)  8) 46 percent
D)  8) 38 percent B

Question 2

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 $40 000 saved for the house purchase and are currently renting a two bedroom apartment for $1500 a month.They want to purchase a two bedroom condo for ?$300 000,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.

Accepted Answer

Many assumptions are possible.Look for a logical and accurate assessment of the numbers.
Assumptions:
The $40 000 savings needs to cover the down payment and closing costs,so they have 10 percent to put down $30 000.
The remaining $10 000 will be sufficient for closing and moving costs.
CMHC insurance will be $5,400 and they will add that to the mortgage amount
The mortgage will be $275 400,amortized over 25 years,4% interest,compounded semi-annually
Therefore monthly mortgage payment would be $1449
GDSR: 30%1449 + 220 + 100 + (350/2)/8000 = 24.3% so they easily qualify
TDSR: 40%As long as their consumer debt is less than $1,256 monthly payment,they qualify on this too.
Renting is $1500 per month
Buying will be $1944 per month (not including repairs and maintenance inside)
Estimated value in five years
If they rent,they will have $40 000 plus 444 extra a month,so if invested at 4% return,they would have approximately $78 000(PV -40000,PMT-444,I/Y 4,N 60,CPT FV)
If they bought and the condo increased two percent per year,they equity they would have in five years is the equity of the condo minus the remaining mortgage (minus selling commission)
approx $330,000 condo value,minus $15 000 selling commission,minus approx $240 000 mortgage.Equity if they sold the condo: $75 000
So,as long as they want to buy,and are prepared to spend more on accommodation than they have been,and they plan to stay for five or more years,they should go ahead and buy.

Question 3

If Adam's house was purchased for $280 000 five years ago and is worth $296 000 now,and his mortgage was $224 000 and amortized over 25 years,at four percent interest,compounded semi-annually,what is his equity in his house now? (To the nearest $1000)

Accepted Answer

A)  $101 000
B)  $72 000
C)  $85 000
D)  Not enough information given to answer this. A

Question 4

A 15-year mortgage compared to a 30-year mortgage has

Accepted Answer

A)  higher total principal payments.
B)  lower monthly payments.
C)  higher total payments.
D)  lower total payments.

Question 5

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

Accepted Answer

A)  A one-year closed fixed-rate mortgage
B)  A closed convertible five-year VRM
C)  An open variable-rate mortgage
D)  A closed two-year VRM

Question 6

When selling a home,which of the following costs will you incur?

Accepted Answer

A)  Loan application fees
B)  Realtor's commission
C)  Insurance premiums
D)  Appraisal fees

Question 7

Which of the following is most accurate in a case where a seller neglects to disclose a defect that affects the market value of the home they are selling?

Accepted Answer

A)  It is morally repugnant,but commonly done and there is no legal recourse.
B)  It is morally wrong,but is legal due to caveat emptor.
C)  It is morally repugnant,and the seller could be charged for criminal negligence.
D)  It is morally wrong,and the seller could be sued for misrepresentation.

Question 8

Discuss in detail all of the factors that may affect the value of your investment in a home in the future.

Accepted Answer

The answer of Discuss in detail all of the factors...

Question 9

An interest adjustment occurs when there is a difference between the date on which you take possession of your home and the date from which your lender calculates your first mortgage payment.

Accepted Answer

A) True 
 B)False

Question 10

It is a good idea not to disclose defects of the home you are trying to sell,since these will adversely affect your selling price or your ability to sell your home quickly.

Accepted Answer

A) True 
 B)False

Question 11

When purchasing a home,which of the following costs will you incur?

Accepted Answer

A)  Finder's fee
B)  Realtor's commission
C)  Tax arrears payments
D)  Appraisal fee

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The purchase of a home represents a potential risk if you need to move quickly and the home does not appreciate rapidly in value.

Accepted Answer

A) True 
 B)False

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

Online realtor services are more convenient,but usually charge higher commissions than traditional full-service real estate companies.

Accepted Answer

A) True 
 B)False

Question 16

Is purchasing a home an expense,an investment,or both? How important is it to consider how long you plan to remain in one location in order to determine the value in purchasing?

Accepted Answer

The answer of Is purchasing a home an expense,an investment,or...

Question 17

Principal,interest,and property taxes on a mortgage are $1209,with heating costs of $68 and condo fees of $180 monthly.The borrower also has a student loan with $100 monthly payments.If the gross debt service ratio required is 30 percent,what will be the lowest monthly income that will qualify for the mortgage financing?

Accepted Answer

A)  $4557
B)  $4857
C)  $4257
D)  $4890

Question 18

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.

Accepted Answer

A) True 
 B)False

Question 19

Martina and Anton are attempting to qualify for total mortgage financing of $1486,heating costs of $68,and they have a car loan payment of $346.What minimum gross monthly income will they need to qualify for both GDS ratio of 30 percent and TDS ratio of 40 percent?

Accepted Answer

A)  $6333
B)  $4750
C)  $5180
D)  $4953

Question 20

It is impossible to finance a home purchase worth $210 000 with only $10 500 to put down.

Accepted Answer

A) True 
 B)False

Exam 7: Managing Your Financial Resources - Purchasing and Financing a Home

Mortgage companies usually charge interest semi-annually.What would be the effective rate of interest on a mortgage at 8.25 percent compounded semi-annually?

If Adam's house was purchased for $280 000 five years ago and is worth $296 000 now,and his mortgage was $224 000 and amortized over 25 years,at four percent interest,compounded semi-annually,what is his equity in his house now? (To the nearest $1000)

A 15-year mortgage compared to a 30-year mortgage has

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

When selling a home,which of the following costs will you incur?

Which of the following is most accurate in a case where a seller neglects to disclose a defect that affects the market value of the home they are selling?

Discuss in detail all of the factors that may affect the value of your investment in a home in the future.

An interest adjustment occurs when there is a difference between the date on which you take possession of your home and the date from which your lender calculates your first mortgage payment.

It is a good idea not to disclose defects of the home you are trying to sell,since these will adversely affect your selling price or your ability to sell your home quickly.

When purchasing a home,which of the following costs will you incur?

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

The purchase of a home represents a potential risk if you need to move quickly and the home does not appreciate rapidly in value.

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.

Online realtor services are more convenient,but usually charge higher commissions than traditional full-service real estate companies.

Is purchasing a home an expense,an investment,or both? How important is it to consider how long you plan to remain in one location in order to determine the value in purchasing?

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.

Martina and Anton are attempting to qualify for total mortgage financing of $1486,heating costs of $68,and they have a car loan payment of $346.What minimum gross monthly income will they need to qualify for both GDS ratio of 30 percent and TDS ratio of 40 percent?

It is impossible to finance a home purchase worth $210 000 with only $10 500 to put down.