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

Linda and Matthew Pape are both graduates of UBC and they have been married for five years. They are currently interested in buying a house and a new vehicle. Matt works as a Physician in Vancouver and he earns $8,000.00 net per month after tax and deductions. Linda 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 $1,225,000 and that would be amortized over 25 years at an annual interest rate of 3.25%. There would be additional costs associated with the property including annual property taxes of $7,200, 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 up front. They plan on making a 20% down payment on the purchase price of the property.

The vehicle they are considering purchasing is a Honda CRV which is retailing for $42,650 including taxes, etc, and the dealer is offering zero down with interest at 4.0% for the duration of the loan which would be for seven years. This would be driven mainly by Matt and he would be responsible for the loan. Linda owns a 2018 Toyota Camry with a market value of $25,000.

As far as assets and liabilities go Matt and Linda have RRSPs worth $100,000 and $60,000 respectively, and they also have a combined savings/chequing account worth $35,000. Matt has student loans of $100,000 that are being repaid at 5.5% over a 10 year term. Linda 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 an 17% interest rate and requires minimum payments of 3% per month. The balance on Matts card is $10,000 and Linda 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

• $800 per month on food
• $400 per month on entertainment
• estimated auto insurance will cost $120 per month for Matt and $105 for the Linda
• estimated fuel costs of $300 each per month
• gym membership for Matt of $100 per month
• fitness classes for Linda of $150 per month
• Matt spends approximately $400 per month on lunches eating out
• they each spend $1,500 per year on gifts for friends and family
• they expect personal care (haircuts, grooming) 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 $200 per month each on miscellaneous items like coffee, newspapers, etc.