Question

Vanessa wants to buy a condo that costs $300,000 on April 1, 2020. She is excited as she has always rented. Her Net Worth statement shows:

Description	Fair Market Value
Savings account	$40,000
Furniture	$10,750
Car	$20,500
Registered Retirement Savings Plan (RRSP)	$51,650
Tax-Free Savings Account (TFSA)	$500

Insert the correct response.

1. Vanessa would like to put a 20% down payment which she calculates as $_____________.   
2. Vanessa currently has $40,000 in her savings account to put towards her down payment, she is however missing $ _________________________ for the remaining down payment.
3. For the missing amount in b), Vanessa could participate in the _____________________, where she would withdraw the amount from her ________________________________.
4. Vanessa would have up to ___________    years to reimburse her withdrawal. The minimum amount that she would need to reimburse would be $ ________________every year under the plan in c). The first repayment can be made no later than December 31st of the 2nd year following the year she made the withdrawal. It’s also important to note that the repayment cannot be deducted from her taxable income when she files her income tax return but if she fails to reimburse the minimum amount required, she will be______________ on that amount.
5. If Vanessa provides the 20% as a down payment, she would have a __________________ mortgage and would therefore not require ___________________________ insurance.

Vanessa is looking to obtain the lowest interest rate possible on her mortgage. She is however unsure if she should obtain a Closed or Open Mortgage. Insert either Open or Closed.

1. You advise her that ________ Mortgages, would allow her to pay off her entire mortgage balance at any time throughout the term. The drawback is that she would pay a higher interest rate for that option. You let her know that such mortgages are for those that are planning to move in the short future, or for those expecting a lump sum of money through an inheritance or bonus, that would allow them to pay off their entire mortgage early. As she wants the lowest interest rate, you recommend: ________________ Mortgage.

Answer 1

Please find the below Answers mewntioned in Bold & Underline:

1. Vanessa would like to put a 20% down payment which she calculates as $ 60,000.   
2. Vanessa currently has $40,000 in her savings account to put towards her down payment, she is however missing $ 20,000 for the remaining down payment.
3. For the missing amount in b), Vanessa could participate in the Home Buyer's Plan (HBP), where she would withdraw the amount from her Registered Retirement Savings Plan (RRSP).
4. Vanessa would have up to 15 years to reimburse her withdrawal. The minimum amount that she would need to reimburse would be $ 1,333.33 every year under the plan in c). The first repayment can be made no later than December 31st of the 2nd year following the year she made the withdrawal. It’s also important to note that the repayment cannot be deducted from her taxable income when she files her income tax return but if she fails to reimburse the minimum amount required, she will be charged/taxed based on the applicable tax rate on that amount.
5. If Vanessa provides the 20% as a down payment, she would have a $ 240,000 mortgage and would therefore not require Mortgage Default Insurance or CMHC insurance.

Vanessa is looking to obtain the lowest interest rate possible on her mortgage. She is however unsure if she should obtain a Closed or Open Mortgage. Insert either Open or Closed.

1. You advise her that Open Mortgages, would allow her to pay off her entire mortgage balance at any time throughout the term. The drawback is that she would pay a higher interest rate for that option. You let her know that such mortgages are for those that are planning to move in the short future, or for those expecting a lump sum of money through an inheritance or bonus, that would allow them to pay off their entire mortgage early. As she wants the lowest interest rate, you recommend: Closed Mortgage.