Case Study Robert & Angela: (15 marks)

Robert and Angela are newlyweds, and they are considering buying their first home now that the wedding is behind them, and they are settled into their careers. Robert is a teacher and Angela works in marketing. They are currently living with Angelas parents and are looking at buying a townhouse close to the school where Robert teaches. Angela works from home, but she will have to travel to the office a couple of days a week.

They are meeting with their financial advisor at the bank to get an idea of what they can afford to spend on a home. They have been working hard to save towards their down payment. They have $90,000 from savings and wedding gifts and it is equally split between each of their Tax-Free Savings Accounts.

They have provided you with the following information about their current financial situation:

Income:	Amount
Roberts Income	$65,000
Angelas Income	$74,000
Assets:
Chequing Account	$3,000
Savings TFSAs (Robert and Angela)	$90,000
Car	$15,000
Emergency Fund - TFSA	$10,000
Liabilities:
Student Loan Balance	$9,000
Credit Card Balance	$3,000
Current Monthly Expenses:
Food	$450
Gas and Car Maintenance	$500
Minimum Credit Card payment	$90
Student Loan Payment	$270
Entertainment	$500
Estimated Monthly Future Expenses:
Property Tax	$325
Heating	$200

The current 5-year fixed mortgage rate is 4.1%. If the current Bank of Canada 5-year rate is 5.25%, how much would they qualify for now assuming they must pass the stress test? (8 marks)

If they spend the maximum, will they need a high ratio mortgage (GE or CMHC insurance)? (2 marks)

Explain to Robert and Angela, what creditors look for when they apply for a mortgage? (5 marks)