Munawar is a first time buyer and bought a brand new townhouse in Oshawa for $212 000. He has saved enough to make a 5% down payment and will have to pay mortgage loan insurance at 2.75% of the mortgage balance. Munawar wants the insurance premium added to the maximum allowable loan balance. Determine his maximum initial mortgage balance.

Question

Quizplus · Accepted Answer

First, we need to find out Munawar's down payment. 
5% of $212,000 = $10,600
Next, we need to find out the maximum loan amount that Munawar can borrow without having to pay mortgage insurance premium out of pocket. 
$212,000 - $10,600 = $201,400
Since Munawar wants the insurance premium added to the maximum allowable loan balance, we need to add the premium to the maximum loan amount. 
2.75% of $201,400 = $5,538.50
$201,400 + $5,538.50 = $206,938.50
Therefore, Munawar's maximum initial mortgage balance is $206,938.50, and the correct answer is C.

Munawar Is a First Time Buyer and Bought a Brand