Assignment $1\mathrm{.}1$: Affordability, Initial Costs, and Mortgages

Mr$.$ and Mrs$.$ Dupont are considering buying a split$-$level, four$-$bedroom house with

a purchase price of $$286,000.$ The Duponts can make a down payment of $$42,000.$

Mr$.$ Dupont's gross annual income is $$63,300.$ Mrs$.$ Dupont is working part$-$time

while she attends university. Her gross annual income is $$19,500.$ The Duponts are

expecting their financial institution to offer them a fixed$-$rate mortgage rate of $3\mathrm{.}5\%$

over $15$ years. The annual taxes on the property are $$3760.$ The annual heating costs

of the house are $$3550.$

a$)$ Calculate the Gross Debt Service Ratio. $(4$ marks$)$

b$)$ Can the Duponts afford this house? $(1$ mark$)$

c$)$ If the Duponts decide to amortize their mortgage over a $25-$year period, can they

afford this house? Justify your answer with calculations. $(3$ marks$)$