QUESTION NO.

ANSWER NO. 1

PART A

According to the facts given in the above question the maximum loan is calculated as follows:

Present Lending Value of Home = $250,000× 1.30 (value up by 30 percent)

= $325,000×0.8 (Loan To value of 80 percent)

= $ 260,000

So, as according to the loan to value fixed at 80 percent the maximum loan which can be obtained by
Andre and Anna will be $260,000.

PART B

Mortgage Rate as Per Bank of Canada website is J2 = 4.6 %

As per the rate shown above it depicts about the average interest rate for a for 5-year fixed
mortgage rate presented 5 years ago.

J2 = 4.6% - J12 = 4.55%

PMT × a [(300, J12)] = $187,500

PMT × a [(300,4.55)] = $187,500

PMT = $1,048.21

OSB 60 = Calculation as shown below:

PRESS DISPLAY

4.6 Press NOM% 3.77

2 Press P/YR 2

Press EEF% 4.65

12 Press P/YR 12

Press NOM% 4.55

187500 PV 187,500

0 FV 0

300 N 300

PMT - 1,048.2108

1048.21 +/- PMT -1,048.21

60 INPUT Press AMORT PER 60-60

=== 164,889.64

The Final OSB60 as per the calculation will be 164,889.64

PART C

According to the facts shown in the question the maximum monthly payment using gross debt
service ratio is been calculated as:

Gross debt service ratio

= ( Annual Mortgage Payment+ Annual Property taxes)/ Annual Gross Income

GDSR = 0.32

Maximum Annual Mortgage payment = 0.32($5,500×12)-$2,000

Maximum Annual Mortgage payment =$19,120

So, Maximum monthly Payment = - $1,593.3

PART D

As According to the facts shown in the question

We can Assume the current Mortgage Rate J2 = 3.77 %

The rate is as per The Royal Bank of Canada.

So, J2 = 3.77% - J12 = 3.74%

Present Value = $1,593.3 × [{240, J12}]

Present value Calculated as shown below:

PRESS DISPLAY

3.77 Press NOM% 3.77

2 Press P/YR 2

Press EEF% 3.80

12 Press P/YR 12

Press NOM% 3.74

1593.3 +/- PMT -1,593.3

0 FV 0

240 N 240

PV 268,959.212

So, the final Present value will be 268,959.212

Hence Proved

PART E

So, the maximum current Loan to value ratio is $260,000 (solved in Part 1)

Maximum Loan as per Gross Debt service Ratio is $268,959.2

Now as the outstanding balance on the current loan is not bigger than the maximum limit allowed,
so according to that Anna and Andre will not be liable to pay any amount to renew their loan.

Outstanding Balance - Maximum allowed Loan

$164,889 - $260,000.

= -$95,111

Total Additional Funds will be -$95,111

Hence Proved

QUESTION NO: 2

ANSWER NO: 2

PART A

According to the facts given in the question, the NOI can be calculated by using following
calculations:

Total Rent For 1 Year = Monthly Rent × Total Suites × 12

Total Rent = $900 × 50 × 12

= $540,000

Gross Potential Income = Total Rent + Additional Rent

= 540,000 + Parking Rent

= 540,000 + 10,000×12

= 540,000 + 120,000

= $660,000

Effective Gross Income = Gross Potential income – Vacancy Allowance

= $660,000 – 10,800

= $649,200

Net Operating Income = Effective Gross Income – Operating expenses

= $649,200 – 215,000

Final Operating Income = $434,200

Hence Proved

PART B

Landing Value is calculated as:

Net Operating Income ÷ Capitalization Rate

Lending Value = $439,200 ÷ 0.09

= $4,824.44

PART C

1. As per the given question

Loan to Value Ratio = 70%
= 0.70 × Lending Value
= 0.70 × $4,824.44
= $3.377,111.1

2. Safety Margin = 15 % of NOI (given in question)

Maximum Annual payment = NOI (1- Safety Margin)

= $434,200(1-0.15)

= $369,070

Maximum Monthly Payment = $369,070 ÷ 12

= $30,755.8

The Maximum Loan will be calculated as solved below:

Assume the current lending rate for 15-year term mortgage as

J2 = 7%

J12 = 96.900047%

Present Value = $30,755.83 × a [{180, J12 = 6.900047%}]

PRESS DISPLAY

7 Press NOM% 7

2 Press P/YR 2

Press EFF% 7.122

12 Press P/YR 12

Press NOM% 6.900047

 180 N 180

30755.83 +/- PMT -30,755.83

0 FV 0

PV 3,443,140.13

3. Debt Coverage Ratio = 1.25 (Given in Question)

So, the Maximum Annual Payment is calculated as:

Maximum annual payment = NOI ÷ DCR
= $434,200 ÷ 1.25
So, the Maximum annual payment will be = $ 347,360

Now, we will find the Maximum Monthly payment:

Maximum monthly payment = maximum annual payment ÷ 12
= $347,360 ÷ 12
= $ 28,946.67

Solving for Maximum Loan

Let’s Assume the current lending for 15 year to be 7 percent
Now, J2 = 7%

J12 = 6.900047%
PV = $28,946.67 × a [{180 , J12 }]
After calculating the final Present value will be

PV = $3,240,603.2
Hence Proved

PART D

The Maximum Loan available is calculated as follows:

Maximum Loan = Debt Coverage Ratio

Maximum loan = $3,240,603.2

So, the maximum loan available is $3,240,603.2

Hence Proved

QUESTION NO: 3

ANSWER NO: 3
Mortgage Rates: A mortgage rate is the rate of interest charged in a mortgage. Mortgage rates are
determined by the lender and can be either fixed, staying the same for the term of the mortgage or
variable fluctuations.

The mortgage rate is a primary consideration for homebuyers looking to finance a new home
purchase with a mortgage loan. Other factors also involved are collateral, principal, interest, taxes,
and insurance.

History of Mortgage Rates is introduced in the year 1971, so in the same year when Freddie Mac
started surveying lenders, 30-year fixed rate Mortgages goes between 7.29% to 7.73%. the annual
average rate of inflation began rising in 1974 and continued till 1981 to a rate of 9.5%. As a result,
the lenders increased rates to keep up with unchecked inflation leading to mortgage rate volatility
for borrowers.

Analyzing the Mortgage Rates:

As shown above in the graph, it clearly depicts that the interest rate on mortgage is between 4% to
5% percent but as we can see the graph that the maximum rate of interest was in the years between
1904 to 1986 but after the year 1995 the rate is not increased and is going down till date.

B. Prime Rates: The prime rates are the interest rate that commercial banks charge their most
creditworthy corporate customers. The federal funds overnight rate serves as the basis for the
prime rate, and prime serves as the starting point for most other interests’ rates.

How to Determine Prime Rates?

Default risk is the main determiner of the interest rate that a bank charges a borrower. Because a
bank’s best customers have little chance of defaulting, the bank can charge them a rate that is lower
than the rate they charge a customer who has a greater likelihood of defaulting on a loan.

Each bank sets its own interest rates no there is no chance of any issue.

Prime Rate Table for ICICI Bank:

Analyzing the Prime rates:

As we all know the prime rates depends on each bank as what they offers to their customers but still
if we can see the table above it clearly depicts that after the year of 2008 the interest price of ICICI
bank is coming down as in the year 2008 it started from 6 percent and in todays time it is at 2.45%

So, this can be considered as a decline in the prime interest rates.

QUESTION No:5

ANSWER No: 5

CMHC (Canada mortgage and Housing Corporation)

Beginning with the CMHC which is known as Canada mortgage and housing Corporation is a crown
corporation of the government of Canada. Its superseding agency was established after world war 2,
to help returning war veterans find housing. It has since expanded its mandate to assist housing for
all Canadian’s.

Important key Features of CMHC are as follows:

1. CMHC mortgage loan insurance makes you able to get a mortgage for up to 95% of the
purchase price of a home.
2. It also ensures you to get a reasonable interest rate, even with your smaller down
payments.

For example, if the house costs $500,000 or less you’ll need a minimum down payment of 5%, if
the home costs $1,000,000 or more, mortgage loan insurance is not available.

PRIVATE MORTGAGE INSURER:

Comparison Between CMHC and Private Mortgage insurer:

As to start with the beginning, according to the survey of 2012 CMHC has announced