University of Saskatchewan

COMM 329

COMM329: Chapter 7

1. Which of the following is true about condominiums?
   1. The purchaser owns the land on which the condominium is built.                        B) Maintenance fees of common areas are shared.

C) They have more privacy than single family homes.                                   D) You will be responsible for repairing your leaking roof.

2. Which of the following should not be considered when selecting a condominium?
   1. Availability of companies that perform maintenance and repair services in the area                B) Taxes

C) The present and future cost of condominium maintenance fees                          D) Resale value

3. Which of the following costs associated with home ownership is hardest to budget for?
   1. Insurance       B) Taxes C) Repairs          D) Mortgage payments
4. Which of the following is most important when selecting a home?
   1. Taxes B) Insurance      C) Resale value                 D) Location
5. When applying for a variable-rate mortgage loan, the most important cause for concern is
   1. possible rate increases.                            B) length of loan.

C) renewing the term after five years.   D) background on different mortgage companies.

6. If you buy a new home rather than an older home, you will have to pay
   1. real estate commissions. B) fire insurance premiums. C) deposit for some utilities (phone, electric, etc.). D) GST.
7. When homeowners expect that interest rates will rise, they prefer
   1. fixed-rate loans. B) variable-rate mortgages. C) balloon-payment mortgages. D) decreasing-term mortgages.
8. A 15-year mortgage compared to a 30-year mortgage has
   1. a lower appraisal fee.               B) higher interest costs over the life of the loan. C) lower legal fees. D) a faster buildup of equity.
9. The schedule that discloses the monthly payment that you will make, based on a specific mortgage amount, a fixed interest rate level, and maturity is called a(n)
   1. depreciation schedule. B) payment table.      C) amortization table.    D) obligation schedule.
10. The initial rate on a VRM will typically be
    1. relatively low interest based on the prime rate.            B) relatively high to allow the bank to recoup costs.

C) about the same as a fixed-rate loan on the same maturity.                D) lower interest rates set by the bond market

11. For a $72 000 mortgage at 9 percent, the monthly payments would be $730 for a 15-year mortgage and $579 for a 30-year mortgage. What amount would be closest to the expected total savings in interest by using a 15-year mortgage?

A) $27 180           B) $54 360            C) $77 040            D) $131 000

12. The total household income available is $3963. Mortgage payments including taxes, principal, and interest are $1189. In addition, there are condo fees of $125 and heating costs of $56 monthly and a car lease of $241. What is the gross debt service ratio?

A) 40.7 percent                 B) 30.0 percent                 C) 33.2 percent                 D) 34.6 percent

13. Martina and Anton are attempting to qualify with a total mortgage financing of $1486, heating costs of $68, and a car loan payment of $346. What minimum gross monthly income will they need to qualify for both gross debt service ratio (GDSR) of 30% and total debt service ratio (TDSR) of 40%?

A) $6333               B) $4750               C) $5180               D) $4953

 

 

14. Which of the following is not one of the closing costs in purchasing a home?

A) Appraisal fee B) Home inspection fee                             C) GST/HST    D) Moving costs to the new home

15. Which of the following is not one of the mortgage payment frequencies?

A) Biweekly        B) Semi-monthly              C) Weekly           D) Semi-weekly

 

16. List four key components of closing costs and estimate a dollar amount for each one.

 

17. Peter and Mary make a $25 000 down payment on a $400 000 home. With a mortgage loan insurance rate of 2.75%, what is the mortgage loan insurance premium that Peter and Mary have to pay?

 

18. Is purchasing a home an expense, an investment, or both?

 

 

19. What should you consider when determining an affordable down payment and monthly mortgage payments?

 

 

20. List the criteria you should use when selecting a home.

 

 

21. What are closing costs? List and briefly describe the different closing costs you might incur when applying for a mortgage.

 

 

22. What is the difference between the amortization period and the mortgage term? What is the closed mortgage? What is an open mortgage? Which type is more popular? Why?

 

 

23. What is the mortgage refinancing? Are there any disadvantage to refinancing?

 

 

24. Dorothy and Matt are ready to Purchase their first home. Their current monthly income is $4,900, and their current monthly expenses are $3,650. Their rent makes up $650 of their cash flow. They would like to put 10% of their income in savings every month and leave another $200 per month in their checking account for emergencies. How much of a mortgage payment, including taxes and utilities, can-they manage under these conditions?

 

 

26. Larry and Laurie have found a home and made a $325,000 offer that has been accepted. They make a down payment of 10%. The CMHC mortgage loan insurance premium is 2% of the mortgage amount required. Larry and Laurie have decided to pay this-fee at the time of closing instead of having it added to the mortgage. Other fees include a $175 loan application fee, a $250 appraisal fee, a $300 home inspection fee, $540 in legal fees, and $350 for title search and insurance. How much cash will Larry and Laurie need at Closing?