Question

Anusha and Naveen are planning to buy their first home. They have saved $30,000 and will withdraw the maximum from their RRSPs under the Home Buyers’ Plan. They will pay the cost of CMHC mortgage loan insurance separately. They estimate closing costs at $8,200 and will take a 25-year mortgage at a rate of 3.2%, compounded semi-annually, for a 3-year term. They will pay the mortgage monthly. The home they wish to buy costs $450,000.

How much of a mortgage loan will the couple need?

How much will CMHC loan insurance cost?

What will be the couple’s monthly mortgage payment and loan balance at the end of their term?

Answer 1

Cost of the House	450000
Processing charges	8200
Total	458200
Savings	30000
RRSP withdrawl	50000
Loan to be taken	378200

CMHC loan

Down payment for the loan	71800
(450000-378200)
% to Home Price	15.96
(71800/450000*100)
Percentage of mortgage to be paid as insurance cost	2.80%
CMHC Loan insurance cost	10590

Loan Amount	378200
Rate of Interest	3.2 % compunded semi annually
Effective Rate of Interest=	((1+(0.032/2))^2)
=	0.032256
=	3.23%
No of Years	25
Monthly Payment =	(378200 * (0.032256/12))/(1-(1+(0.032256/12))^-12*25
=	1838.16

The loan balance as per amortisation table posted below at the end of 3 years will be

= $347,189.34

Amortisation table

PmtNo.	Beginning Balance	Scheduled Payment	Total Payment	Principal	Interest	Ending Balance
1	$      378,200.00	$       1,838.16	$       1,838.16	$          821.56	$      1,016.60	$ 377,378.44
2	377,378.44	1,838.16	1,838.16	823.77	1,014.39	376,554.68
3	376,554.68	1,838.16	1,838.16	825.98	1,012.18	375,728.70
4	375,728.70	1,838.16	1,838.16	828.20	1,009.96	374,900.50
5	374,900.50	1,838.16	1,838.16	830.43	1,007.73	374,070.07
6	374,070.07	1,838.16	1,838.16	832.66	1,005.50	373,237.41
7	373,237.41	1,838.16	1,838.16	834.90	1,003.26	372,402.52
8	372,402.52	1,838.16	1,838.16	837.14	1,001.02	371,565.38
9	371,565.38	1,838.16	1,838.16	839.39	998.77	370,725.98
10	370,725.98	1,838.16	1,838.16	841.65	996.51	369,884.34
11	369,884.34	1,838.16	1,838.16	843.91	994.25	369,040.43
12	369,040.43	1,838.16	1,838.16	846.18	991.98	368,194.25
13	368,194.25	1,838.16	1,838.16	848.45	989.71	367,345.80
14	367,345.80	1,838.16	1,838.16	850.73	987.43	366,495.06
15	366,495.06	1,838.16	1,838.16	853.02	985.14	365,642.04
16	365,642.04	1,838.16	1,838.16	855.31	982.85	364,786.73
17	364,786.73	1,838.16	1,838.16	857.61	980.55	363,929.12
18	363,929.12	1,838.16	1,838.16	859.92	978.24	363,069.20
19	363,069.20	1,838.16	1,838.16	862.23	975.93	362,206.97
20	362,206.97	1,838.16	1,838.16	864.55	973.61	361,342.43
21	361,342.43	1,838.16	1,838.16	866.87	971.29	360,475.55
22	360,475.55	1,838.16	1,838.16	869.20	968.96	359,606.35
23	359,606.35	1,838.16	1,838.16	871.54	966.62	358,734.82
24	358,734.82	1,838.16	1,838.16	873.88	964.28	357,860.94
25	357,860.94	1,838.16	1,838.16	876.23	961.93	356,984.71
26	356,984.71	1,838.16	1,838.16	878.58	959.57	356,106.13
27	356,106.13	1,838.16	1,838.16	880.95	957.21	355,225.18
28	355,225.18	1,838.16	1,838.16	883.31	954.85	354,341.87
29	354,341.87	1,838.16	1,838.16	885.69	952.47	353,456.18
30	353,456.18	1,838.16	1,838.16	888.07	950.09	352,568.11
31	352,568.11	1,838.16	1,838.16	890.46	947.70	351,677.65
32	351,677.65	1,838.16	1,838.16	892.85	945.31	350,784.81
33	350,784.81	1,838.16	1,838.16	895.25	942.91	349,889.56
34	349,889.56	1,838.16	1,838.16	897.66	940.50	348,991.90
35	348,991.90	1,838.16	1,838.16	900.07	938.09	348,091.83
36	348,091.83	1,838.16	1,838.16	902.49	935.67	347,189.34