You buy a house for its current market value of $630,000 with 10% down and amortize over 25 years.
i. Including CMHC insurance, how much will your outstanding mortgage be when the mortgage is issued?
ii. If the rate term is 5 years and the interest rate is 2.99%, what is the outstanding mortgage at the end of the term?
iii. If house prices drop by 35% over the 5 years of the rate term, what is the difference between the outstanding mortgage and the value of the house? (This situation is often called ‘under water’ and can lead to a number of problems – e.g. one needs to add money to sell).
You can use excel to solve this. Please explain/show work.