Your brother is applying for mortgage. Your brother earns $120,000 per year. He is going to purchase
Question:
Your brother is applying for mortgage. Your brother earns $120,000 per year. He is going to purchase a house which costs $900,000. The property taxes will be $450 per month. The heating costs are $200 per month. You brother has a car loan and the payments are $420 per month and he a student loan payment of $250 per month.
The lender is prepared to lend your brother money at a rate of 5.8% compounded semi-annually. The term will be 5 years and the amortization period will be 25 years. Your brother will make monthly payments on his mortgage. The lender's requirements are that the GDS ratio cannot be greater than 0.39 and TDS ratio cannot be greater than 0.44.
The lender is required to stress all new mortgages.
1. What is the maximum size of the mortgage that the lender can give your brother?
2. Assuming your brother is granted the maximum mortgage amount what will be the amount of your brother's monthly mortgage payments?