Question

Karen’s bank just called as she submitted a bank application for a mortgage. Karen’s gross annual income is $120,000. Her monthly heating would be $375, condo fees of $650 per month, and annual property taxes would be $4,550 along with monthly car payments of $780 and other monthly debt payments of $420. Given the bank has calculated her Total Debt Service (TDS) ratio as 39%, how much is her monthly mortgage payment?

Answer 1

Total Debt Service (TDS) ratio = ( Housing related Expenses + Car Payments + Loan payments + Loan expenses)/Annual income

- Annual Heating = $ 375*12 = $4500

- Annual Condo Fees = $650*12 = $7800

- Annual Property Taxes = $ 4550

- Annual car payments = $780*12 = $9360

- Annual other Debt Payment = $ 420*12 = $5040

Assuming Annual mortgage payment to be X

0.39 = (4500 + 7800 + 4550 + 9360 + 5040 + X)/120,000

46800 = 31250 + X

X = $ 15,550

Annual Mortgage Payment = $ 15550

Monthly mortgage payment = $ 15550/12

= $ 1295.83

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