Question: Case Study Assignment 1 Navjot and Steven are wanting to purchase their first home. They have agreed that a 2-bedroom condo would be ideal. In
Case Study Assignment 1
Navjot and Steven are wanting to purchase their first home.
They have agreed that a 2-bedroom condo would be ideal. In their city, the current market value for this type of condo is $650,000. They are comfortable using an assumption of a mortgage with a 25 year amortization, 5 year fixed rate at 5% interest.
Based on their extensive research, they estimate that their housing costs will be:
- $200 for heat
- $200 for property taxes
- $500 for condo fees
- $300 for maintenance costs
Navjot has $50,000 in her RRSP and $5,000 in a TFSA. Steven has $5,000 in an RRSP.
You have put together a quick preliminary cash flow statement for them.
Personal Cash Flow Statement for Navjot and Steven
| Income | |
| Gross Income (Navjot) | $7,500 |
| Gross Income (Steven) | $5,000 |
| Total Income | $12,500 |
| Expenses | |
| Rent | $1,000 |
| Internet & Phones | $200 |
| Groceries | $500 |
| Clothing | $250 |
| Utilities | $200 |
| Recreation | $1,000 |
| Student Loans | $1,000 |
| Car Leases | $800 |
| Insurance | $250 |
| Car Fuel and Maintenance | $250 |
| Total Expenses | $5,450 |
They have come to you for your help in figuring out:
- What is the maximum monthly mortgage payment they could afford based on their TDSR?
- What is the maximum mortgage they would qualify for based on that payment?
- What is the maximum value of home they qualify for? Assuming they are wanting a conventional mortgage, what would the down payment be?
- Can they afford the condo? If not, what could they consider doing?
- If they decide to move ahead and find a home for the maximum they qualify in one year from now, how much do they need to save for the down payment?
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