Chapter $7$ Case Study

$$ A married couple has a gross income of $$125,000$ living in Cranbrook.

$$ The couple are renting a $2$ bedroom condo for $$1,600$ per month but would like to purchase

their own $2-3$ bedroom property in plans of having a family $($currently no kids$).$

$$ The couple would like to know what kind of home they could purchase based on the current

market $($you can look at single family dwellings$/$townhomes$/$condos$/$mobile homes$).$

$$ The couple have monthly vehicle payments of $$700$ and no other debt.

$$ The couple have savings of $$15,000$ to use towards a down payment.

Required:

$1.$ Check MLS real estate listings in Cranbrook and select $3$ properties you think might work for the

couple. You can select a variety of prices and housing types.

$2.$ Based on income, how much of a monthly mortgage payment can the couple afford using the

CMHC Gross Debt Service Ratio and Total Debt service ratio? You can use the CMHC online

calculator.

$3.$ Estimate all additional costs related to owning the properties you have selected $($see Chapter $7$

in text for help.$)$

$4.$ What is the minimum down payment to purchase your selected properties?

$5.$ Calculate additional costs in purchasing the new homes $($see Chapter $7$: CMHC insurance,

Property Transfer Tax, lawyer...$).$ Also, Rate Hub has an excellent calculator.

$6.$ Mortgage rates have increased dramatically recently $$ research current interest rates for a $5$

year fixed mortgage. Using this rate, calculate the monthly mortgage payments on the

properties you have selected assuming a $25-$year amortization $($repayment$)$ period.

$7.$ Canada has instituted a $$stress test$$ when issuing mortgages. Borrowers must qualify for a

mortgage at current rates $+2\%.$ Using this figure, calculate the monthly mortgage payments on

the properties.

$8.$ Are the couples dreams of home ownership reasonable? What would you recommend to the

couple?