The Archibalds are eligible for Canada Mortgage and Housing Corporation’s Mortgage Loan Insurance. Consequently, their limits are 95% for the loan-to-value ratio, 32% for the GDS ratio, and 40% for the TDS ratio.
a. Rounded to the nearest $100, what is the maximum 25-year mortgage loan for which they can qualify if their gross monthly income is $5000 and their payments on personal debt amount to $600 per month? Assume monthly heating costs of $150 and property taxes of $200 per month. Current mortgage rates are 6.6% compounded semiannually.
b. If they make the minimum down payment, what is the maximum price (rounded to the nearest $100) they can pay for a home? (Assume the purchase price equals the appraised value.)