Illustrate how GDS and TDS ratios as well as cash flow are important in calculating what size mortgage a person can afford. Use the following example to illustrate your conclusion. Hannah earns an annual salary of $72 000 and has following monthly expenses.

Taxes and benefits: $1800    Rent $1300

Groceries and restaurants $700 Transportation $300

Car loan, 3 more years $300    Hobbies and entertainment $550

Student loan, 5 more years $350 RRSP Savings $700

Hannah has $31 000 saved in her RRSP. There is a new condo development going up in her area and she hopes to be able to purchase her own place. The unit she has her heart set on costs $310 000 and they advertise a mortgage rate of 3.5%, compounded semi-annually, for this development. The property taxes will be $170 per month, heating costs $80, and condo fees $300.