; Buying a house
Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out
Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

Buying a house

VIEWS: 24 PAGES: 6

  • pg 1
									MEL 4E

Expectation - Gather and compare, through investigation, information about purchase
              prices of different types of owned accommodation in the local community.



Buying a house
Go to The Canada Mortgage and Housing website at www.cmhc-schl.gc.ca

Click on

        English
        Consumers
        Buying a home
        Homebuying Step by Step
        Step 2 – Are you financially ready?


1.       How Much Can You Afford?

a)       What is the first affordability rule? (2 marks)


b)       Housing costs include P.I.T.H. What do these letters stand for? (2 marks)


c)       What is the “second affordability rule”? (2 marks)


d)       Scroll down the webpage to “Your maximum home price”. Use the table
         provided to answer the following questions. (The table assumes a mortgage
         interest rate of 8% which is higher than today‟s rates).


         i)     Bob and Lainey have a combined income of $70,000. They have saved
                $12,000 for a down payment. What is the price of a house that they can
                afford? (2 marks)


         ii)    Marcy has inherited $60,000 and she plans to use it as a down payment.
                Her gross annual income is $61,000. How much house can she afford? (2
                marks)
       iii)   Edna makes $35,000 per year. She has saved $5000 for a down payment.
              How much house can she afford? (2 marks)




Costs to be Aware of When You Buy
Go to The Canada Mortgage and Housing website at www.cmhc-schl.gc.ca

Click on

      English
      Consumers
      Buying a home
      Homebuying Step by Step
      Step 3 – How Much Will It Really Cost?


Using the information on the webpage describe each of the following and state an
estimate or range for the price of each.

Assume that you are buying a new house that costs $175,000 and is on a well. Also
assume that you are making a 10% down payment. (24 marks)



Item                          Description                   Price range or estimate
7% GST


Down Payment


Home Inspection


Survey Fee


Land Transfer Tax*


Prepaid Taxes or Utility                                    $500
Bills
Electrical and phone
connection fees

Legal Fees


Appraisal Fee


Mortgage Loan Insurance
Premium

Water Quality and Quantity
Certification

Mortgage Payment**


Property Insurance                                              $1500


Total

* Go to www.homelegalcost.com and click on Land Transfer Tax on the menu to the left.

** Go to www.royalbank.com/products/mortgages to access their mortgage centre.

        Look at the menu on the left hand side of the page
        Click on mortgage calculators
        Click on mortgage payment calculator
        Click on use this calculator

        Calculate the mortgage cost based on the information in your chart. Select
        “fixed” for rate type, 5% for interest rate, 5 years for interest term, payment
        frequency – monthly and a 25 year amortization period.
                                                  Name ____________________

MEL 4E1 Summative Assessment – Buying a House

1.

     a)     Log on to the MLS (multiple listing service) website at www.mls.ca

     b)     Click on „residential properties‟

     c)     Type „Cobourg‟ in „Where do you want to look?‟

Here’s the scenario
2.   You have a secure job in Cobourg that pays $60 000 per year. How much can
     you afford to pay for PITH if you should not exceed 32% of your gross monthly
     income? Calculate it here. (4 marks)




3.   If your heating will cost $200 per month, what is left for your mortgage payment?
     That is your target. (2 marks)




4.   Fill in “refine your search” on the left side of the page. Remember! Don‟t choose
     too many characteristics or you will not get many houses in your search. Find a
     house you can afford. Click on the picture to get more details. Print off the
     page.

NOW…

5.   Use the mortgage calculator at the top of the page under the MLS # and fill in the
     following information.

     a)     Assume that you will make a down payment of $20,000, you will have a
            5% interest rate, 25 year amortization period and a 5 year fixed term.



     b)     What is the monthly mortgage payment? (3 marks)
       c)     How do you know you can afford it? (4 marks)




END OF PART 1!!!


1.     Log on to www.royalbank.com/products/mortgages to access their mortgage
       centre.

       Look at the menu on the left hand side of the page
       Click on mortgage calculators
       Click on mortgage payment calculator
       Click on use this calculator


Assume a $150,000 mortgage at 5% amortized over 25 years with a fixed 5 year term.

Complete the following table. (12 marks)

Payment          Amount             Amortization      Total Interest   Savings vs
Frequency                           (years)           Cost             Monthly
                                                                       Payment
Answer these questions. Show your work. (2 marks each)

a)       How many years would be shaved off of a mortgage where monthly payments
         were being made if accelerated weekly payments were made?


b)       How much money would be saved if accelerated bi-weekly payments were made
         instead of bi-weekly payments?


c)       Calculate how much money is paid per year for

         i)     a monthly payment plan


         ii)    a weekly payment plan


         iii)   compare the amounts in parts i and ii and explain why you would still save
                money if you made weekly payments.


3.       Now calculate the cost of borrowing for the same mortgage if we change the
         interest rate. (10 marks)

Complete the table and plot a graph of Cost of Borrowing vs. Interest Rate

Interest Rate                                  Cost of borrowing
                                               Based on monthly payments

6

8

10

12

14

        Put interest rate on the x-axis
        Put cost of borrowing on the y-axis

								
To top