The Smith want to buy a condo in Surrey. Banks use the affordability rule: no more than 32% of gross monthly household income can go towards paying the mortgage, property taxes, heating costs and 50% of the condo fees. Their gross income is $10000 per month, property taxes are $1800/year, heating costs average $50/month and condo fees $400/month.

a) What is the maximum monthly mortgage payment they could afford?

b) Under the new mortgage rules (must qualify using the posted rate j2 = 5.34%), how large of a mortgage would they qualify for if it is amortized over 25 years and paid monthly