John and Mary are both graduates of Oxford University and they have been married for five years. They are currently interested in buying a house and a new vehicle. John works as a Physician in New York and he earns $8,000.00 net per month after tax and deductions. Mary is a teacher at a local school where she earns $3,000 net per month after tax and deductions. Their combined gross salaries are $200,000 per year.

They are looking at buying a house that is listed for $525,000 and that would be amortized over 25 years at an annual interest rate of 4.75%. There would be additional costs associated with the property including annual property taxes of $5,200, home insurance of $150 per month, and estimated monthly heat and hydro costs of $250 per month. There would also be additional closing costs associated with the property purchase including property transfer tax on the purchase value paid as a lump sum upfront. They plan on making a 20% down payment on the purchase price of the property.

The vehicle they are considering purchasing is a Mercedes 305 which is retailing for $32,650 including taxes, etc, and the dealer is offering zero down with interest at 6.0% for the duration of the loan which would be for seven years. This would be driven mainly by John and he would be responsible for the loan. Mary owns a 2014 BMW with a market value of $15,000.

As far as assets and liabilities go John and Mary have RRSPs worth $100,000 and $60,000 respectively, and they also have a combined savings/chequing account worth $35,000. John has student loans of $100,000 that are being repaid at 5.5% over a 10-year term. Mary received a $100,000 inheritance and she has these funds sitting in a money market account. They each also have a CIBC Visa that carries a 17% interest rate and requires minimum payments of 3% per month. The balance on Johns card is $10,000 and Mary owes $5,000. They each have lines of credit where they could each borrow $30,000 at prime + 1% (interest only) if they needed to. Their personal possessions are worth approximately $50,000 each.

They expect to spend $1000 per month on food $600 per month on entertainment estimated auto insurance will cost $150 per month for John and $125 for the Mary estimated fuel costs of $300 each per month gym membership for John of $100 per month fitness classes for Mary of $150 per month john spends approximately $600 per month on lunches eating out they each spend $1,500 per year on gifts for friends and family they expect personal care (like haircuts) to cost $150 per month clothing/dry-cleaning is expected to cost a total of $175 per month household cleaning supplies will cost $100 per month they also expect that they spend $300 per month each on miscellaneous items like coffee, newspapers, etc.

1.Are their investment expenses in the cash flow, and if so, what are the insurance and financial planning fees?

2.Assuming they have paid 20% of the down payment for the house, how much will this save them in CMHC insurance?

3. If the bank allowed for a TDS ratio of 28% what would be the maximum mortgage they would have qualified for?