Reference no: EM133117348
Cathy is 48 years old, and Jamie is 49 years old. They have been married for the past 22 years and have no children. They are both senior managers with over 15 years each working for the federal government. They each make $75,000 per year in gross pay from their respective jobs and have no other sources of income. The first year they were married they bought a house, which is now worth $425,000 and does not have a mortgage on it. They pay $3,600 per year in property tax and $100 per month in heat. They also pay $100 per month in hydro, $80 per month in cable and phone service, and $635 per year in home insurance. The couple owns one car, a dodge Caravan worth $15,000, and they have a loan outstanding with a balance of $10,000 and a monthly payment of $550. The couple only has one credit card, an Everyday Bank MasterCard, with a $5,000 limit and no balance. They have no other debt outstanding.
Cathy has an RRSP totalling $128,000, and Jamie's RRSP totals $114,000. They have a joint savings account with an $18,000 balance and a chequing account with a $2,000 balance. They also have a non-registered mutual fund worth $52,000. They have been dealing with Everyday Bank for the past 22 years. A quick check of their credit bureau reports indicates that they both have excellent credit history. Cathy and Jamie are hoping to purchase a brand new motor home to do some travelling and have dropped by to see you at Everyday Bank for a loan. The motor home costs $65,000. They are prepared to contribute $15,000 from their savings if you can give them a loan for $50,000 with a 10-year amortization (and term) at 4% with monthly payments of $506.
Assuming you would approve the loan and wanted to take some form of collateral:
1. List three assets you could take to secure the loan (other than a personal guarantee) and explain the positive and negative aspects of taking each item as collateral (from the lending institution's perspective or the borrower's perspective)
2. Which of the items you listed would you prefer to take as collateral?
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