Comprehensive Examination of GICs, Mortgages, Debt, and Ratios

This assignment delves into the analysis of Guaranteed Investment Certificates (GICs) and mortgages, focusing on interest rates, loan-to-value ratios, and the rationale behind the spread between GIC and mortgage rates. It explores different mortgage lenders in Canada, including TD Canada Trust and FNB Corporation, and their lending practices. The assignment also examines debt service ratios, including gross debt service (GDS) and total debt service (TDS), outlining the components and industry standards. Furthermore, it addresses amortization schedules and the reasons for discrepancies in outstanding balances, along with the circumstances under which discount rates are offered. The analysis covers various aspects of financial instruments and lending practices, offering a comprehensive overview of the Canadian financial landscape.

Answer 1
Part A
Guaranteed Investment Certificate are Canadian investment which provides a rate of return which is
fixed in nature on the amount of capital invested for a fixed period of time. The same is equivalent to
Certificate of Deposit or Term deposit. These are issued by Canadian Financial institutions such as
bank or credit union. These certificate represents the loan issued by the investor to the bank and can
be of varied period ranging from 6 months to 5 years. Different banks have different rate of interest
on GIC instrument. The rate of GIC of HSBC for $1000 to $ 99,999 has been presented as under:
Sl.
No. Particulars Rate of Interest (%)
1. 6 Months 0.30%
2. 1 Year 0.550%
3. 2 Year 0.650%
4. 3 Year 0.850%
5. 4 Year 1.100%
6. 5 Year 1.250%
The date for collection from the website of HSBC is collected on 17th July, 2019 and has been
presented for CIBC1 Long-term GIC2.
Mortgages means an agreement by which bank lends money to the investor by taking borrowers
property under control. If the borrower defaults on debt then the property can be attached for
recovery of loan.
1 https://canada.financialadvisory.com/6-month-gic.html
2https://www.cibc.com/en/interest-rates/gic-rates.html
6 Months 1 Year 2 Year 3 Year 4 Year 5 Year
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
GIC-$1000-$99,999
Maturity
Rate

The rate of interest on mortgage for the period has been presented as under:
Sl.
No. Particulars Rate of Interest (%)
1. 6 Months 3.19%
2. 1 Year 3.29%
3. 2 Year 3.49%
4. 3 Year 3.69%
5. 4 Year 4.29%
6. 5 Year 5.04%
The date for date collection from the website of HSBC3 is collected on 17th July, 2019
Part B
The rate of both GIC and mortgages is upward sloping and positive symbolising that market is
positive about the economy. It indicates that market is expecting a higher interest rate in the future.
Thus, investing in long term securities pays a higher rate of return. Further, in case of mortgages
higher time period loan attract higher rate of interest.
Thus, positive curve symbolise long term rate provide greater return in GIC than short term. Further,
in case of loan too long term mortgages provide better return to bank.
There is a spread between GIC and the mortgages rate on account of the following rationales:
(a) Bank act as an intermediary which accepts public deposit and lends it to borrower for return;
3 https://www.hsbc.ca/mortgages/rates/
6 Months 1 Year 2 Year 3 Year 4 Year 5 Year
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Mortgage Rate of Interest (%)
Maturity
Rate

(b) Bank has administrative cost which is met from lending and borrowing which accounts for more
than 70% of the revenue of the business;
(c) The opportunity cost of capital also results in gap as bank has to provide interest rate to the
lender and has to meet its expenses too.
(d) Liquidity is higher in case of GIC than in case of Mortgages. Hence, GIC and Mortgages gap is
present;
(e) Risk is higher in mortgage than in GIC as bank are cash rich solid institutions;
(f) Matching of asset and liability requires bank to lend at a higher rate in order to match the asset
and liability side of balance sheet.
Answer 2
There are many mortgage lender in Canada. Some of the prominent mortgage lenders are F.N.B
Corporation, Scotia Bank, TD Canada trust etc.
Part A
I have done a google research to find the top companies in Canada providing the service and then
applied filter to contact the bank. The bank are quick in responding and provide very quick solution
to the customer once you contact them.
Under conventional model mortgage, TD Canada trust provides 80% LTV with 20% down payment
and rest funded by Bank. The said mortgage is generally for a single family dwelling as duly
highlighted in their website.
The LTV4 ratio or Loan to Value Ratio symbolise the maximum amount of loan that shall be disbursed
by the bank considering the value of the property. In the case of TDD Trust i.e. 80% of the value of
property.
Under conventional model mortgage, FNB Corporation provides 85% LTV with 15% down payment
and rest funded by Bank. The said mortgage is generally for a single family dwelling as duly
highlighted in their website5.
Yes, there are difference as the LTV ratio changes on the nature of property. The highest LTV is
provided for the residential property. Further, the LTV also varies on the basis of the credit rating of
the borrower, location of the property etc.
Part B
Yes, many times in Canada the lenders do carry an appraisal to ascertain the true value of the
property when they doubt that the value of the paper does not represent the true value of the
property. Further, the appraisal is carries out to safeguard the amount of money lent and to create a
buffer to prevent erosion of loan on account of drastic fall in the value of property. Further, the
lending value is generally near 80% of the value of property. In case the same reaches near about
90% of the value of the property, it may cause issue for the bank. Also, the crisis in 2008 emphasizes
on appraisal.
4 https://www.td.com/ca/en/personal-banking/products/mortgages/first-time-home-buyer/down-
payments/
5https://www.fnb-online.com/borrow/personal-loans/home-equity-loan

Part C
Currently, the maximum the gross debt service ratio applied is 35% of the gross family income. This
ratio defines the percentage of the gross income of the borrower which are generally used for
covering the payment of housing cost like utility bill, mortgages, taxes etc6. The present threshold is
set at 35%7.
Yes, the rate varies depending on the credit rating of the borrower and the financial strength of the
books of the borrower. The higher the strength and good the books are the higher the rate of gross
debt service ratio shall be.
Part D
The following elements are included in the Gross debt service ratio computation:
(a) Monthly Housing Costs encompassing principal, interest and heat;
(b) 50% of Condo fees;
(c) Gross monthly income.
Part E
The total debt service ratio represents the percentage of your income that will be required to cover
all the debts. The formula for computation of Total debt service is similar to the computation of the
gross debt service. Further, in the total debt service ratio all your debts taken into consideration for
analysis. The debt encompass car loan, credit car loan, alimony etc. The industry standard for the
ratio is approximately 42%.
For computing the ratio add all debt related cost and divide the same with monthly income.
The other steps that lenders take to understand the credit worthiness of the borrower encompass
the following:
(a) Total Expense Ratio;
(b) Living Standards and habits;
(c) Savings;
(d) Financial soundness;
Part F
Discount Rates are offered generally in the following circumstances:
(a) Customer Loyalty;
(b) Strong Financials;
(c) Government aided incentive programs;
(d) Attract customers and increase business;
(e) Negotiation.
6 https://www.superbrokers.ca/library/glossary/terms/gross_debt_service.php
7https://www.whichmortgage.ca/article/what-are-tds-gds-and-ltv-ratios-174913.aspx

Typically the rate of discount is 20% .
Answer 3
There outstanding balance has not turned to zero because the EMI amount has been rounded off
on account of which higher payment has been made to the lender from the borrower. Further, it is
general industry practice to round the figure to the next larger integer.
The last payment shall be reduced by $4.42 to adjust for excess payment and break even the
situation.
Particulars Facts
Face Value 1,00,000.00
Future Value $0
Amortization Period 25
Term 25
Interest Rate 7.25%
Compounding Frequency 2
Payment Frequency 1
Effective Annual Rate (j1) 0.073814
Nominal Rate 0.073814
Payment number: Payment Interest Principal Outstanding
Balance
0 $ 1,00,000.00
1 $8,878.00 $7,381.41 $1,496.59 $98,503.41
2 $8,878.00 $7,270.94 $1,607.06 $96,896.34
3 $8,878.00 $7,152.31 $1,725.69 $95,170.66
4 $8,878.00 $7,024.93 $1,853.07 $93,317.59
5 $8,878.00 $6,888.15 $1,989.85 $91,327.74
6 $8,878.00 $6,741.27 $2,136.73 $89,191.01
7 $8,878.00 $6,583.55 $2,294.45 $86,896.56
8 $8,878.00 $6,414.19 $2,463.81 $84,432.75
9 $8,878.00 $6,232.32 $2,645.68 $81,787.07
10 $8,878.00 $6,037.04 $2,840.96 $78,946.11
11 $8,878.00 $5,827.33 $3,050.67 $75,895.44
12 $8,878.00 $5,602.15 $3,275.85 $72,619.59
13 $8,878.00 $5,360.35 $3,517.65 $69,101.94
14 $8,878.00 $5,100.69 $3,777.31 $65,324.64
15 $8,878.00 $4,821.88 $4,056.12 $61,268.51
16 $8,878.00 $4,522.48 $4,355.52 $56,912.99
17 $8,878.00 $4,200.98 $4,677.02 $52,235.97
18 $8,878.00 $3,855.75 $5,022.25 $47,213.72
19 $8,878.00 $3,485.04 $5,392.96 $41,820.75
20 $8,878.00 $3,086.96 $5,791.04 $36,029.71

Payment number: Payment Interest Principal Outstanding
Balance
21 $8,878.00 $2,659.50 $6,218.50 $29,811.21
22 $8,878.00 $2,200.49 $6,677.51 $23,133.70
23 $8,878.00 $1,707.59 $7,170.41 $15,963.29
24 $8,878.00 $1,178.32 $7,699.68 $8,263.61
25 $8,878.00 $609.97 $8,268.03 -$4.42
Payment number: Payment Interest Principal Outstanding
Balance
0 $ 2,00,000.00
1 $1,184.56 $623.06 $561.51 $1,99,438.49
2 $1,184.56 $621.31 $563.26 $1,98,875.24
3 $1,184.56 $619.55 $565.01 $1,98,310.23
4 $1,184.56 $617.79 $566.77 $1,97,743.46
5 $1,184.56 $616.03 $568.54 $1,97,174.92
6 $1,184.56 $614.26 $570.31 $1,96,604.61
7 $1,184.56 $612.48 $572.08 $1,96,032.53
8 $1,184.56 $610.70 $573.87 $1,95,458.66
9 $1,184.56 $608.91 $575.65 $1,94,883.01
10 $1,184.56 $607.12 $577.45 $1,94,305.56
11 $1,184.56 $605.32 $579.25 $1,93,726.31
12 $1,184.56 $603.51 $581.05 $1,93,145.26
13 $1,184.56 $601.70 $582.86 $1,92,562.40
14 $1,184.56 $599.89 $584.68 $1,91,977.73
15 $1,184.56 $598.07 $586.50 $1,91,391.23
16 $1,184.56 $596.24 $588.33 $1,90,802.90
17 $1,184.56 $594.41 $590.16 $1,90,212.74
18 $1,184.56 $592.57 $592.00 $1,89,620.75
19 $1,184.56 $590.72 $593.84 $1,89,026.91
20 $1,184.56 $588.87 $595.69 $1,88,431.21
21 $1,184.56 $587.02 $597.55 $1,87,833.67
22 $1,184.56 $585.16 $599.41 $1,87,234.26
23 $1,184.56 $583.29 $601.28 $1,86,632.98
24 $1,184.56 $581.41 $603.15 $1,86,029.84
25 $1,184.56 $579.54 $605.03 $1,85,424.81
26 $1,184.56 $577.65 $606.91 $1,84,817.90
27 $1,184.56 $575.76 $608.80 $1,84,209.09
28 $1,184.56 $573.86 $610.70 $1,83,598.39
29 $1,184.56 $571.96 $612.60 $1,82,985.79
30 $1,184.56 $570.05 $614.51 $1,82,371.28

Payment number: Payment Interest Principal Outstanding
Balance
31 $1,184.56 $568.14 $616.43 $1,81,754.86
32 $1,184.56 $566.22 $618.35 $1,81,136.51
33 $1,184.56 $564.29 $620.27 $1,80,516.24
34 $1,184.56 $562.36 $622.20 $1,79,894.03
35 $1,184.56 $560.42 $624.14 $1,79,269.89
36 $1,184.56 $558.48 $626.09 $1,78,643.80
37 $1,184.56 $556.53 $628.04 $1,78,015.77
38 $1,184.56 $554.57 $629.99 $1,77,385.77
39 $1,184.56 $552.61 $631.96 $1,76,753.82
40 $1,184.56 $550.64 $633.93 $1,76,119.89
41 $1,184.56 $548.66 $635.90 $1,75,483.99
42 $1,184.56 $546.68 $637.88 $1,74,846.11
43 $1,184.56 $544.70 $639.87 $1,74,206.24
44 $1,184.56 $542.70 $641.86 $1,73,564.38
45 $1,184.56 $540.70 $643.86 $1,72,920.52
46 $1,184.56 $538.70 $645.87 $1,72,274.65
47 $1,184.56 $536.68 $647.88 $1,71,626.78
48 $1,184.56 $534.67 $649.90 $1,70,976.88
49 $1,184.56 $532.64 $651.92 $1,70,324.96
50 $1,184.56 $530.61 $653.95 $1,69,671.00
51 $1,184.56 $528.57 $655.99 $1,69,015.01
52 $1,184.56 $526.53 $658.03 $1,68,356.98
53 $1,184.56 $524.48 $660.08 $1,67,696.90
54 $1,184.56 $522.42 $662.14 $1,67,034.76
55 $1,184.56 $520.36 $664.20 $1,66,370.55
56 $1,184.56 $518.29 $666.27 $1,65,704.28
57 $1,184.56 $516.22 $668.35 $1,65,035.93
58 $1,184.56 $514.13 $670.43 $1,64,365.50
59 $1,184.56 $512.05 $672.52 $1,63,692.99
60 $1,184.56 $509.95 $674.61 $1,63,018.37
61 $1,184.56 $507.85 $676.71 $1,62,341.66
62 $1,184.56 $505.74 $678.82 $1,61,662.83
63 $1,184.56 $503.63 $680.94 $1,60,981.90
64 $1,184.56 $501.50 $683.06 $1,60,298.84
65 $1,184.56 $499.38 $685.19 $1,59,613.65
66 $1,184.56 $497.24 $687.32 $1,58,926.33
67 $1,184.56 $495.10 $689.46 $1,58,236.87
68 $1,184.56 $492.95 $691.61 $1,57,545.26
69 $1,184.56 $490.80 $693.77 $1,56,851.49
70 $1,184.56 $488.64 $695.93 $1,56,155.56
71 $1,184.56 $486.47 $698.09 $1,55,457.47
72 $1,184.56 $484.29 $700.27 $1,54,757.20
73 $1,184.56 $482.11 $702.45 $1,54,054.75
74 $1,184.56 $479.92 $704.64 $1,53,350.11
75 $1,184.56 $477.73 $706.83 $1,52,643.28
76 $1,184.56 $475.53 $709.04 $1,51,934.24

Payment number: Payment Interest Principal Outstanding
Balance
77 $1,184.56 $473.32 $711.25 $1,51,222.99
78 $1,184.56 $471.10 $713.46 $1,50,509.53
79 $1,184.56 $468.88 $715.68 $1,49,793.85
80 $1,184.56 $466.65 $717.91 $1,49,075.94
81 $1,184.56 $464.41 $720.15 $1,48,355.79
82 $1,184.56 $462.17 $722.39 $1,47,633.40
83 $1,184.56 $459.92 $724.64 $1,46,908.75
84 $1,184.56 $457.66 $726.90 $1,46,181.85
85 $1,184.56 $455.40 $729.17 $1,45,452.69
86 $1,184.56 $453.13 $731.44 $1,44,721.25
87 $1,184.56 $450.85 $733.72 $1,43,987.53
88 $1,184.56 $448.56 $736.00 $1,43,251.53
89 $1,184.56 $446.27 $738.29 $1,42,513.24
90 $1,184.56 $443.97 $740.59 $1,41,772.64
91 $1,184.56 $441.66 $742.90 $1,41,029.74
92 $1,184.56 $439.35 $745.22 $1,40,284.53
93 $1,184.56 $437.03 $747.54 $1,39,536.99
94 $1,184.56 $434.70 $749.87 $1,38,787.12
95 $1,184.56 $432.36 $752.20 $1,38,034.92
96 $1,184.56 $430.02 $754.55 $1,37,280.37
97 $1,184.56 $427.67 $756.90 $1,36,523.48
98 $1,184.56 $425.31 $759.25 $1,35,764.22
99 $1,184.56 $422.94 $761.62 $1,35,002.61
100 $1,184.56 $420.57 $763.99 $1,34,238.61
101 $1,184.56 $418.19 $766.37 $1,33,472.24
102 $1,184.56 $415.80 $768.76 $1,32,703.48
103 $1,184.56 $413.41 $771.15 $1,31,932.33
104 $1,184.56 $411.01 $773.56 $1,31,158.77
105 $1,184.56 $408.60 $775.97 $1,30,382.80
106 $1,184.56 $406.18 $778.38 $1,29,604.42
107 $1,184.56 $403.75 $780.81 $1,28,823.61
108 $1,184.56 $401.32 $783.24 $1,28,040.37
109 $1,184.56 $398.88 $785.68 $1,27,254.69
110 $1,184.56 $396.43 $788.13 $1,26,466.56
111 $1,184.56 $393.98 $790.58 $1,25,675.98
112 $1,184.56 $391.52 $793.05 $1,24,882.93
113 $1,184.56 $389.05 $795.52 $1,24,087.41
114 $1,184.56 $386.57 $798.00 $1,23,289.41
115 $1,184.56 $384.08 $800.48 $1,22,488.93
116 $1,184.56 $381.59 $802.98 $1,21,685.96
117 $1,184.56 $379.09 $805.48 $1,20,880.48
118 $1,184.56 $376.58 $807.99 $1,20,072.49
119 $1,184.56 $374.06 $810.50 $1,19,261.99
120 $1,184.56 $371.54 $813.03 $1,18,448.96

Payment number: Payment Interest Principal Outstanding
Balance
121 $1,184.56 $369.00 $815.56 $1,17,633.40
122 $1,184.56 $366.46 $818.10 $1,16,815.30
123 $1,184.56 $363.91 $820.65 $1,15,994.65
124 $1,184.56 $361.36 $823.21 $1,15,171.44
125 $1,184.56 $358.79 $825.77 $1,14,345.67
126 $1,184.56 $356.22 $828.34 $1,13,517.32
127 $1,184.56 $353.64 $830.92 $1,12,686.40
128 $1,184.56 $351.05 $833.51 $1,11,852.89
129 $1,184.56 $348.45 $836.11 $1,11,016.78
130 $1,184.56 $345.85 $838.71 $1,10,178.06
131 $1,184.56 $343.24 $841.33 $1,09,336.73
132 $1,184.56 $340.62 $843.95 $1,08,492.79
133 $1,184.56 $337.99 $846.58 $1,07,646.21
134 $1,184.56 $335.35 $849.21 $1,06,796.99
135 $1,184.56 $332.70 $851.86 $1,05,945.13
136 $1,184.56 $330.05 $854.51 $1,05,090.62
137 $1,184.56 $327.39 $857.18 $1,04,233.44
138 $1,184.56 $324.72 $859.85 $1,03,373.60
139 $1,184.56 $322.04 $862.53 $1,02,511.07
140 $1,184.56 $319.35 $865.21 $1,01,645.86
141 $1,184.56 $316.66 $867.91 $1,00,777.95
142 $1,184.56 $313.95 $870.61 $99,907.34
143 $1,184.56 $311.24 $873.32 $99,034.01
144 $1,184.56 $308.52 $876.04 $98,157.97
145 $1,184.56 $305.79 $878.77 $97,279.20
146 $1,184.56 $303.05 $881.51 $96,397.69
147 $1,184.56 $300.31 $884.26 $95,513.43
148 $1,184.56 $297.55 $887.01 $94,626.42
149 $1,184.56 $294.79 $889.78 $93,736.64
150 $1,184.56 $292.02 $892.55 $92,844.09
151 $1,184.56 $289.24 $895.33 $91,948.77
152 $1,184.56 $286.45 $898.12 $91,050.65
153 $1,184.56 $283.65 $900.91 $90,149.73
154 $1,184.56 $280.84 $903.72 $89,246.01
155 $1,184.56 $278.03 $906.54 $88,339.48
156 $1,184.56 $275.20 $909.36 $87,430.11
157 $1,184.56 $272.37 $912.19 $86,517.92
158 $1,184.56 $269.53 $915.04 $85,602.89
159 $1,184.56 $266.68 $917.89 $84,685.00
160 $1,184.56 $263.82 $920.75 $83,764.25
161 $1,184.56 $260.95 $923.61 $82,840.64
162 $1,184.56 $258.07 $926.49 $81,914.15
163 $1,184.56 $255.19 $929.38 $80,984.77
164 $1,184.56 $252.29 $932.27 $80,052.50

Payment number: Payment Interest Principal Outstanding
Balance
165 $1,184.56 $249.39 $935.18 $79,117.32
166 $1,184.56 $246.47 $938.09 $78,179.23
167 $1,184.56 $243.55 $941.01 $77,238.22
168 $1,184.56 $240.62 $943.94 $76,294.27
169 $1,184.56 $237.68 $946.89 $75,347.39
170 $1,184.56 $234.73 $949.83 $74,397.55
171 $1,184.56 $231.77 $952.79 $73,444.76
172 $1,184.56 $228.80 $955.76 $72,489.00
173 $1,184.56 $225.82 $958.74 $71,530.26
174 $1,184.56 $222.84 $961.73 $70,568.53
175 $1,184.56 $219.84 $964.72 $69,603.81
176 $1,184.56 $216.84 $967.73 $68,636.08
177 $1,184.56 $213.82 $970.74 $67,665.34
178 $1,184.56 $210.80 $973.77 $66,691.57
179 $1,184.56 $207.76 $976.80 $65,714.77
180 $1,184.56 $204.72 $979.84 $64,734.93
181 $1,184.56 $201.67 $982.90 $63,752.03
182 $1,184.56 $198.61 $985.96 $62,766.07
183 $1,184.56 $195.53 $989.03 $61,777.04
184 $1,184.56 $192.45 $992.11 $60,784.93
185 $1,184.56 $189.36 $995.20 $59,789.73
186 $1,184.56 $186.26 $998.30 $58,791.43
187 $1,184.56 $183.15 $1,001.41 $57,790.02
188 $1,184.56 $180.03 $1,004.53 $56,785.49
189 $1,184.56 $176.90 $1,007.66 $55,777.83
190 $1,184.56 $173.76 $1,010.80 $54,767.03
191 $1,184.56 $170.61 $1,013.95 $53,753.08
192 $1,184.56 $167.46 $1,017.11 $52,735.97
193 $1,184.56 $164.29 $1,020.28 $51,715.70
194 $1,184.56 $161.11 $1,023.45 $50,692.24
195 $1,184.56 $157.92 $1,026.64 $49,665.60
196 $1,184.56 $154.72 $1,029.84 $48,635.76
197 $1,184.56 $151.51 $1,033.05 $47,602.71
198 $1,184.56 $148.30 $1,036.27 $46,566.44
199 $1,184.56 $145.07 $1,039.50 $45,526.94
200 $1,184.56 $141.83 $1,042.73 $44,484.21
201 $1,184.56 $138.58 $1,045.98 $43,438.23
202 $1,184.56 $135.32 $1,049.24 $42,388.99
203 $1,184.56 $132.05 $1,052.51 $41,336.48
204 $1,184.56 $128.77 $1,055.79 $40,280.69
205 $1,184.56 $125.49 $1,059.08 $39,221.61
206 $1,184.56 $122.19 $1,062.38 $38,159.23
207 $1,184.56 $118.88 $1,065.69 $37,093.55
208 $1,184.56 $115.56 $1,069.01 $36,024.54

Payment number: Payment Interest Principal Outstanding
Balance
209 $1,184.56 $112.23 $1,072.34 $34,952.20
210 $1,184.56 $108.89 $1,075.68 $33,876.53
211 $1,184.56 $105.54 $1,079.03 $32,797.50
212 $1,184.56 $102.17 $1,082.39 $31,715.11
213 $1,184.56 $98.80 $1,085.76 $30,629.34
214 $1,184.56 $95.42 $1,089.14 $29,540.20
215 $1,184.56 $92.03 $1,092.54 $28,447.66
216 $1,184.56 $88.62 $1,095.94 $27,351.72
217 $1,184.56 $85.21 $1,099.36 $26,252.37
218 $1,184.56 $81.78 $1,102.78 $25,149.59
219 $1,184.56 $78.35 $1,106.22 $24,043.37
220 $1,184.56 $74.90 $1,109.66 $22,933.71
221 $1,184.56 $71.45 $1,113.12 $21,820.59
222 $1,184.56 $67.98 $1,116.59 $20,704.01
223 $1,184.56 $64.50 $1,120.06 $19,583.94
224 $1,184.56 $61.01 $1,123.55 $18,460.39
225 $1,184.56 $57.51 $1,127.05 $17,333.33
226 $1,184.56 $54.00 $1,130.57 $16,202.77
227 $1,184.56 $50.48 $1,134.09 $15,068.68
228 $1,184.56 $46.94 $1,137.62 $13,931.06
229 $1,184.56 $43.40 $1,141.16 $12,789.89
230 $1,184.56 $39.84 $1,144.72 $11,645.18
231 $1,184.56 $36.28 $1,148.29 $10,496.89
232 $1,184.56 $32.70 $1,151.86 $9,345.03
233 $1,184.56 $29.11 $1,155.45 $8,189.58
234 $1,184.56 $25.51 $1,159.05 $7,030.53
235 $1,184.56 $21.90 $1,162.66 $5,867.86
236 $1,184.56 $18.28 $1,166.28 $4,701.58
237 $1,184.56 $14.65 $1,169.92 $3,531.66
238 $1,184.56 $11.00 $1,173.56 $2,358.10
239 $1,184.56 $7.35 $1,177.22 $1,180.88
240 $1,184.56 $3.68 $1,180.88 $0.00
Answer 4:

INTRODUCTION
Mortgage market is divided into two parts as primary mortgage market and secondary
mortgage market. Primary mortgage market refers to a market which provides loans to the
normal public and the company who buys property from the market. The secondary
mortgage market is discovered by the financial institutions.
Many people have a vision that the mortgage market is very much complicated but in fact
the reality is different. The mortgage market is very simple to understand and implement.
By understanding properly one can get a proper information about the lenders available in
the market. The first and most important part is to understand who is actually the person
who will lend the money to you. Two types of lender are available in the market institutional
lenders and private lenders. Generally, the institutional lenders are the commercial banks,
Savings and Loan, credit unions, pension funds and insurance companies. The institutional
lenders provide loan to the borrower on the basis of the credit worthiness of the borrower.
The loans are provided on the basis of the rules and guidelines prescribed. On the other
hand, private lenders are generally individuals, companies and they are not regulated by the
government. As the private lenders are not regulated through any government therefore,
they have a very flexible policy.
Depends on the types of loans
Accordingly, on the basis of above information one now knows who is the lender in the
market and how it works. In a market two types of conventional loans prevailed conforming
loans and non-conforming loans. Conforming type of loans is strictly based on Freddie Mac
policy and offer the very attractive rate of interest to the buyer. Non-conforming loans are
the guidelines and policy which are set by the individual lenders.8
Conforming types of loans see the following types of requirements to be meet:
 The borrower must have very low debt and equity ratio
 The borrower must have good credit ratio.
 The requirement of money in order to close the loan amount. This is inclusive of
down payment and the cash reserves required for a particular period.
Non -conforming loan are the types of loan who are not required to follow any specific
guidelines. They have not any rigid guidelines to be followed while lending money.
Primary and secondary mortgage market
8 http://www.eandhrealty.com/faqs/The-mortgage-market-and-how-it-works

Now from the above it is clear the type of loan which is available in the market. There are two
different types of market available primary and secondary market for mortgages. The primary
lenders are the person who directly generally deals with the public at large. These lenders are the
one who not directly lend the money to the borrowers but they make money from the loan
processing fees rather than from interest on loan amount. In the secondary market the lenders lend
money to the borrowers and earn interest from the loan amount. In the secondary market the
largest buyers the government agencies.