BEC 4G1



CIE3M1

Buying A House

Purpose: to understand the costs of buying a house and carrying a mortgage.

Part 1- Qualifying for a Mortgage

Use the website:

The bank uses this procedure to determine how much they will lend for a mortgage. The variables are:

• Annual Earnings

• Current Debts

• Monthly Housing Costs (outside of Mortgage Payment)

• Down Payment Amount

• Interest Rate

• Mortgage Term

This is an example of the first page of “How Much Can I Afford?”:

[pic]

Use the mortgage qualifier to calculate the maximum mortgage available in each of the following situations.

| |Fishy |Poisson |Guppy |Tuna |Abe Vigoda |

|Spouse’s Income |$40,000 |$28,000 |$51,000 |$73,000 |$150,000 |

|Car Loan |$5,000 ($300/mo.) |$5,000 ($250/mo.) |0 |$20,000 ($525/mo.) |$75,000 ($1600/mo.) |

|Other Debt |$15,000 ($375/mo.) |0 |0 |$10,000 ($145/mo.) |$20,000 ($440/mo.) |

|Credit Cards |VISA – $500 |VISA – $800 |VISA - $5,000 |Mastercard - $10,000 |VISA – $20,000 |

| | |Mastercard - $3,000 | | |AMEX – $30,000 |

|Lines of Credit |Royal Credit Line - |0 |Scotia Line - $12,000 |TD PowerLine - $10,000 |0 |

| |$5,000 | | | | |

|Mortgage Rate |Closed 3-year 4.05% |Closed 2-year 3.85% |Closed 5-year 5.29% |Covertible 6-month |Closed 4-year 4.79% |

| | | | |4.45% | |

|Mortgage Term |20 years |20 years |20 years |20 years |20 years |

|Down Payment ($) |$17,000 |$15,000 |$35,000 |$50,000 |$100,000 |

Using the information in the above chart, find out the Maximum Monthly Housing Cost and the Maximum Purchase Price.

| |Fishy |Poisson |Guppy |Tuna |Abe Vigoda |

|Maximum Monthly | | | | | |

|Housing Cost | | | | | |

|Maximum Purchase | | | | | |

|Price | | | | | |

Part 2 – Finding a House and Calculating Payments

In this section, you will find a real house for each of the five people listed above (Fishy, Poisson, Guppy, Tuna and Abe Vigoda) and calculate their monthly mortgage payment.

Use the website mls.ca . Choose Ontario, and then finally into the Oakville area. You will try to find a house in the Oakville, Burlington, Hamilton or Milton area. Start with Oakville first. If there is nothing available, move to the next place.

Tasks:

1. Find the house each person will buy. Copy the listings into the google doc.

2. Make sure the price of the house is within the range of the person, based on the information you collected in Part 1 (can not exceed, but must be close to Maximum Purchase Price from Part I).

3. Go to . Go to the “Mortgage Payment Calculator.” Enter the amount of the listing that you’ve found, the interest rate, and the payment terms.

➢ Mortgage rates for all individuals will be 2.99%

➢ Payment terms for all individuals will be 25 years

➢ Down payment is the amount from the chart in Part I, and is given in the chart below

➢ Total mortgage amount is the price of the house you’ve selected, minus the appropriate down payment

4. Calculate the monthly and bi-weekly payment amounts. Use this information to complete the following chart.

| |Fishy |Poisson |Guppy |Tuna |Abe Vigoda |

|Mortgage |2.99% |2.99% |2.99% |2.99% |2.99% |

|Rate | | | | | |

|Amortization Period |25 years |25 years |25 years |25 years |25 years |

|Down |$15,000 |$15,000 |$35,000 |$50,000 |$100,000 |

|Payment | | | | | |

|Monthly | | | | | |

|Payment | | | | | |

|Bi-weekly Payment | | | | | |

5. Look at the graph as well as the information that is presented beside it. What conclusions can you draw from it? Hint: consider the interest.

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