Question

given the following information, determine the maximum loan amount of the canadian mortgage: maximum GDS ratio is 32%, annual gross family income $78,000 estimated monthly real estate taxes $200, anticipated interest rate on the mortgage loan: $7.5%: mortgage maturity: 25 years, non mortgage debt payment: $600.

A. $256,986.86

B. $174,969.78

C. $254,400.87

D.$173,209.10

Answer 1

Monthly GDS = 78000/12 * 32% = 2080

Mortgage payment allowed = 2080 - 200 - 600 = 1280

Maximum loan is:

a	Present value of annuity=	P* [ [1- (1+r)-n ]/r ]
P=	Periodic payment	1,280.00
r=	Rate of interest per period
	Annual interest	7.50%
	Number of payments per year	12
	Interest rate per period	0.075/12=
	Interest rate per period	0.625%
n=	number of periods:
	Number of years	25
	Periods per year	12
	number of payments	300
	Present value of annuity=	1280* [ (1- (1+0.00625)^-300)/0.00625 ]
	Present value of annuity=	173,209.10

Answer is 173,209.10